In its financial statements, Shoreham uses straight-line depreciation with the half-year convention. The book value of the equipment at December 31, 2009, will be:
A) $26,600.
B) $42,000.
C) $34,800.
D) Some other amount.

Question

Quizplus · Accepted Answer

Since Shoreham uses straight-line depreciation with the half-year convention, the equipment will be depreciated as though it was purchased on July 1st, 2009. Therefore, the equipment has been in use for 6 months in 2009. The annual depreciation for the equipment is ($48,000 - $6,000) / 5 = $8,400. The depreciation for the 6 months in 2009 is $8,400 / 2 = $4,200. The book value of the equipment at December 31, 2009, would be $48,000 - $4,200 = $43,800.

In Its Financial Statements, Shoreham Uses Straight-Line Depreciation with the Half-Year