Question

A company purchased a piece of equipment for $162,000 on April 1, 2019. The company determined that it has a 5 year life, and an estimated residual value of $2,000. If the company uses the straight-line method for depreciation, what is the depreciation expense for the year ended December 31, 2019?

Answer 1

$24,000

Step-by-step explanation:

First, we will calculate depreciation as;

= Cost - Residual value

= $162,000 - $2,000

= $160,000

Depreciation rate = 1/5 × 100 = 20%

Depreciation per year = 20% × $160,000 = $32,000

Depreciation expense for the year ended December 31, 2019[April to December 9 months] would be;

= 9/12 × $32,000

= $24,000