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29 July, 08:35

Cramer Company purchased equipment on May 1, 2019 for $200,000. The residual value is $20,000 and the estimated useful life is 10 years. What is the Depreciation Expense for the year ending December 31, 2019, if the company uses the straight-line method? (Round your final answer to the nearest dollar.)

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  1. 29 July, 08:43
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    Depreciation expense 2019 = $12,000

    Explanation:

    Giving the following information:

    Cramer Company purchased equipment on May 1, 2019, for $200,000. The residual value is $20,000 and the estimated useful life is 10 years.

    Under the straight-line method of depreciation, we need to use the following formula to calculate the annual depreciation:

    Annual depreciation = (original cost - salvage value) / estimated life (years)

    Annual depreciation = (200,000 - 20,000) / 10 = 18,000

    Now, we need to calculate the depreciation for 8 months:

    Depreciation expense 2019 = (18,000/12) * 8 = $12,000
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