On October 1, 2022, Manning Company places a new asset into service.The cost of the asset is $120,000 with an estimated 5-year life and $30,000 salvage value at the end of its useful life.What is the depreciation expense for 2022 if Manning Company uses the straight-line method of depreciation?
A)$4,500
B)$24,000
C)$6,000
D)$12,000

Question

Quizplus · Accepted Answer

The straight-line depreciation method calculates annual depreciation by subtracting the salvage value from the cost and dividing by the useful life. For 2022, the asset is in service for 3 months, so the annual depreciation is prorated. Annual depreciation = ($120,000 - $30,000) / 5 = $18,000. Prorated for 3 months: $18,000 * (3/12) = $4,500.

On October 1, 2022, Manning Company Places a New Asset