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, 2022.If the straight-line method is used, the depreciation expense for calendar 2022 is
A)$40,000.
B)$37,500.
C)$30,000.
D)$28,125.

Question

Quizplus · Accepted Answer

The annual depreciation expense using the straight-line method is calculated as (Cost - Residual Value) / Useful Life. Here, it is ($160,000 - $10,000) / 4 = $37,500 annually. Since the equipment was purchased on April 1, only 9 months of depreciation applies for 2022. Thus, the depreciation expense for 2022 is $37,500 * (9/12) = $28,125.

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