On June 1,Aaron Company purchased equipment at a cost of $120,000 that has a depreciable cost of $90,000 and an estimated useful life of 3 years and 30,000 hours. Using straight-line depreciation,calculate depreciation expense for the final partial year of service.
A)$12,500
B)$17,500
C)$40,000
D)$30,000

Question

Quizplus · Accepted Answer

The straight-line depreciation expense per year is $30,000 ($90,000 / 3 years). For the final partial year, assuming the equipment is used for a full year, the depreciation expense would be $30,000. However, if the equipment is used for only a partial year, the expense would be prorated based on the number of months used. Since the equipment was purchased on June 1, it would be used for 7 months in the final year (June to December), resulting in a depreciation expense of $12,500 ($30,000 * 7/12).

On June 1,Aaron Company Purchased Equipment at a Cost of $120,000