Question

A company purchased factory equipment on April 1, 2015 for $160,000. It is estimated that the equipment will have a $20,000 salvage value at the end of its 10-year useful life. Using the straight-line method of depreciation, the amount to be recorded as depreciation expense at December 31, 2015 is

Answer 1

$10,500

Step-by-step explanation:

The computation of depreciation expense using the straight line method is seen below;

= [Original cost - Residual value] ÷ Useful life

= [$160,000 - $20,000] ÷ 10 years

= [$140,000] ÷ 10 years

= $14,000

Using straight line method, the depreciation value is the same for the remaining useful life.

Also, from April 1 to 31 December(9 months), the depreciation expense would be;

= $14,000 × 9/12

= $10,500

Therefore, the amount to be recorded as depreciation expense at December 31, 2015 is $10,500