Equipment with a cost of $160,000, an estimated residual value of $10,000, and an estimated life of 4 years, was purchased on April 1, 2012. If the straight-line method is used, the depreciation expense for calendar 2012 is
A)$40,000.
B)$37,500.
C)$30,000.
D)$28,125.

Question

Quizplus · Accepted Answer

The annual depreciation is ($160,000 - $10,000) / 4 = $37,500. Since the equipment was purchased on April 1, 2012, only 9 months of depreciation is recorded for 2012: $37,500 * (9/12) = $28,125.

Equipment with a Cost of $160,000, an Estimated Residual Value