On July 1, 2015, a machine with a useful life of five years and a residual value of $4,000 was purchased for $20,000.Under straight-line depreciation, what is the depreciation expense for calendar 2016?
A)$4,000
B)$3,556
C)$3,200
D)$1,600

Question

Quizplus · Accepted Answer

The annual straight-line depreciation expense is calculated as (purchase price - residual value) / useful life.

In this case, the annual depreciation expense = ($20,000 - $4,000) / 5 = $3,200.

Therefore, the depreciation expense for calendar 2016 (assuming the machine was purchased on July 1, 2015) would be $3,200 x 6/12 (half of the year) = $1,600.

Therefore, the best choice is C, with the correct depreciation expense for calendar year 2016.

On July 1, 2015, a Machine with a Useful Life