If Clark Corp. purchased machinery for $10,000 with no salvage value and a 5 year life on July 1, the depreciation expense in the first year is $1,000.
$10,000/5 × 6/12 = $1,000

Question

Quizplus · Accepted Answer

The formula for calculating straight line depreciation is (cost - salvage value) / useful life. In this case, there is no salvage value and the useful life is 5 years. However, the machinery was only used for 6 months in the first year, so the depreciation expense for the first year is only half of the yearly depreciation expense, which is $1,000. Therefore, the correct calculation is ($10,000 - $0) / 5 years x 6/12 = $1,000.