Use the following information for questions
On January 1, 2012, Baker 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 in 2012.
-The depreciation expense for 2012 using the straight-line method will be
A)$5,850.
B)$6,500.
C)$6,875.
D)$7,250.

Question

Quizplus · Accepted Answer

The straight-line method allocates the total depreciation expense evenly over the useful life of the asset. To calculate the annual depreciation expense, we need to first determine the depreciable cost, which is the original cost of the asset minus the salvage value. In this case, the depreciable cost is $55,000 - $3,000 = $52,000.

The annual depreciation expense is therefore $52,000 / 8 years = $6,500 per year.

Since the equipment was used for 900 hours in 2012 out of an expected total of 8,000 hours, the depreciation expense for 2012 would be 900/8,000 * $6,500 = $731.25

Therefore, the depreciation expense for 2012 using the straight-line method will be $6,500 - $731.25 = $5,768.75, which is closest to Option B.

Use the Following Information for Questions