A company purchased factory equipment on April 1, 2017 for $168000. It is estimated that the equipment will have a $22000 salvage value at the end of its 10-year useful life. Using the straight-line method of depreciation, the amount to be recorded as depreciation expense at December 31, 2017 is a. $16800. b. $12600. c. $10950. d. $14600.

Question

Denisse

Business

13 September, 12:35

A company purchased factory equipment on April 1, 2017 for $168000. It is estimated that the equipment will have a $22000 salvage value at the end of its 10-year useful life. Using the straight-line method of depreciation, the amount to be recorded as depreciation expense at December 31, 2017 is a. $16800. b. $12600. c. $10950. d. $14600.

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Bryant Liu · Answer 1

c. 10950

Explanation:

The depreciation expense in a particular year is charged from the date on which the asset is purchased by the entity. In this case, the factory equipment is purchased on April 1, 2017, so the depreciation expense for the year ended December 31, 2017 will be charged from April 1, 2017 to December 31, 2017 i. e. 9 months.

The Depreciation expense is calculated using the following formula:

(Cost of factory equipment-salvage value/useful life) * 9/12

Depreciation expense = (168000-22000/10) * 9/12=$10,950

Answer is c.$10950