On September 1,a machine with a useful life of 8 years and a residual value of $3,000 was purchased for $47,000.What is depreciation expense in the year of purchase under straight-line depreciation assuming a December 31 year-end?
A)$3,917
B)$3,667
C)$1,958
D)$1,833

Question

Quizplus · Accepted Answer

To calculate the depreciation expense for the year of purchase under straight-line depreciation, we need to use the following formula:

Depreciation expense = (Cost - Residual value) / Useful life

Plugging in the given values, we get:

Depreciation expense = ($47,000 - $3,000) / 8 = $5,500

However, we need to prorate the depreciation expense for the portion of the year the asset was in use. Since the machine was purchased on September 1, it was in use for 4 months (September, October, November, and December). Therefore, the depreciation expense for the year of purchase would be:

Depreciation expense = ($5,500 / 12) x 4 = $1,833

Therefore, the best answer choice is D.

On September 1,a Machine with a Useful Life of 8