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On April 2,2017,Victor,Inc.acquired a new piece of filtering equipment.The cost of the equipment was $160,000 with a residual value of $20,000 at the end of its estimated useful lifetime of 4 years.
-Assume that in its financial statements,Victor uses straight-line depreciation and the half-year convention.Depreciation recognized on this equipment in 2017 and 2018 will be:
A)$40,000 in 2017 and $30,000 in 2018.
B)$23,333 in 2017 and $30,000 in 2018.
C)$17,500 in 2017 and $35,000 in 2018.
D)$20,000 in 2017 and $35,000 in 2018.

Question

Quizplus · Accepted Answer

The straight-line depreciation expense is calculated by subtracting the residual value from the cost and then dividing by the useful life. For this equipment, it's ($160,000 - $20,000) / 4 = $35,000 per year. However, due to the half-year convention, only half of the annual depreciation is recognized in the first year, making it $17,500 for 2017. The full annual depreciation of $35,000 is recognized in subsequent years, including 2018.

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