Refer to the information above. Assume that in its financial statements, Tilton Products uses straight-line depreciation and rounds depreciation for fractional years to the nearest month. Depreciation expense recognized on this machinery in 2009 and 2010 will be:
A) $2,333 in 2009 and $7,000 in 2010.
B) $5,833 in 2009 and $10,000 in 2010.
C) $6,667 in 2009 and $10,000 in 2010.
D) $10,000 in 2009 and $10,000 in 2010.

Question

Quizplus · Accepted Answer

The machinery has a useful life of 6 years, so the depreciation expense per year is $10,000 / 6 = $1,667.

For 2009, the machinery was bought on September 1st, so it was used for 4 months of the year (September, October, November, December). Therefore, the depreciation expense for 2009 is 4/12 * $1,667 = $556, rounded to the nearest month.

For 2010, the machinery was used for the entire year, so the depreciation expense is the full $1,667 for the year.

Total depreciation expense for 2009 and 2010 is $556 + $1,667 = $2,223.

Therefore, the closest answer is C, with $6,667 in 2009 and $10,000 in 2010.

Refer to the Information Above