Question

On April 1 of the current year, Frey Company purchases and places into service new equipment. The cost of the equipment is $75,000. The equipment has an estimated 10-year life and $15,000 salvage value at the end of its useful life. What is the depreciation expense for the current year ending December 31 if the company uses the straight-line method of depreciation?

Answer 1

Answer:

The depreciation expense by December 31=$4,500

Explanation:

The expression for the depreciable cost is as follows;

depreciable cost=Acquisition cost-salvage value

where;

acquisition cost=$75,000

residual value=$15,000

replacing;

depreciable cost=75,000-15,000=$60,000

depreciable cost=$60,000

The annual depreciation can be expressed as;

annual depreciation=depreciable cost/estimated life

where;

depreciable cost=$60,000

estimated life=10 years

replacing;

annual depreciation=60,000/10=6,000

annual depreciation=$6,000

depreciation between April 1 and December 31=(9/12)×6,000=$4,500

depreciation by December 31=$4,500

The depreciation expense by December 31=$4,500