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On January 1, 2015, Sundry Corp.purchased equipment for $55,000.It was expected to last 8 years, after which it will be sold for $3,000.It is expected to be used for a total of 8,000 machine hours, and was used for 900 hours during the year ended December 31, 2015.
-The depreciation expense for 2015 using the straight-line method will be
A)$5,850.
B)$6,500.
C)$6,875.
D)$7,250.

Question

Use the following information for questions 
On January 1, 2015, Sundry Corp.purchased equipment for $55,000.It was expected to last 8 years, after which it will be sold for $3,000.It is expected to be used for a total of 8,000 machine hours, and was used for 900 hours during the year ended December 31, 2015.
-The depreciation expense for 2015 using the straight-line method will be
A)$5,850.
B)$6,500.
C)$6,875.
D)$7,250.

Quizplus · Accepted Answer

The annual depreciation expense using the straight-line method is calculated as (cost of equipment - salvage value) / useful life in years, or in this case, hours. 
Therefore, the annual depreciation expense is (55,000 - 3,000) / 8,000 = $6.50 per hour.
Since the equipment was only used for 900 hours in 2015, the depreciation expense for the year is 900 x $6.50 = $5,850. Therefore, the correct answer is B.

Use the Following Information for Questions