Adkins Bakery uses the modified halfminusmonth convention to calculate depreciation expense in the year an asset is purchased or sold. Adkins has a calendar year accounting period and uses the straightminusline method to compute depreciation expense. On March 17, 2018, Adkins acquired equipment at a cost of $ 140 comma 000. The equipment has a residual value of $ 42 comma 000 and an estimated useful life of 8 years. What amount of depreciation expense will be recorded for the year ending December 31, 2018? (Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.)

Question

Alayna Pitts

Business

25 October, 00:58

Adkins Bakery uses the modified halfminusmonth convention to calculate depreciation expense in the year an asset is purchased or sold. Adkins has a calendar year accounting period and uses the straightminusline method to compute depreciation expense. On March 17, 2018, Adkins acquired equipment at a cost of $ 140 comma 000. The equipment has a residual value of $ 42 comma 000 and an estimated useful life of 8 years. What amount of depreciation expense will be recorded for the year ending December 31, 2018? (Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.)

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Answers (1)

Know the Answer?

Oswaldo Baird · Answer 1

The correct answer is $9187.5.

Explanation:

According to the scenario, the given data are as follows:

Asset cost = $140,000

Residual value = $42,000

Life period = 8 years

So, Annual depreciation can be calculated by using following method:

Annual depreciation = (Asset cost - Residual value) : Life period

= ($140,000 - $42,000) : 8

= $12,250

As depreciation is to be recorded till Dec. 31

So, total time period = Apr - Dec = 9 months

So, Depreciation expense till Dec. 31 = $12,250 * (9 : 12)

= $9,187.5

Hence, Depreciation expense till Dec. 31 is $9,187.5.