Q5SE - Horngren'S Financial And Managerial Accounting

Question

Calculating partial-year depreciation 

On February 28, 2017, Rural Tech Support purchased a copy machine for \(53,400. Rural Tech Support expects the machine to last for six years and have a residual value of \)3,000. Compute depreciation expense on the machine for the year ended December 31, 2017, using the straight-line method.

Step-by-Step Solution

Answer

Depreciation expenses of the business entity are $7,000.

Step 1: Definition of Straight-Line Method

The deprecation method that reports the same depreciation over each year's useful asset life is known as the straight-line method.

Step 2: Depreciation using straight-line method

$\begin{array}{rcl}Depreciation& =& \frac{Cost-Residual value}{Useful life}\times \frac{10}{12}\\ & =& \frac{\$53,400-\$3,000}{6}\times \frac{10}{12}\\ & =& \$7,000\end{array}$