Question

Ouestion Help Cramer Company purchased equipment on May 1, 2019 for $500.000. The residual value is $50.000 and the estimated us straight-nemethod? Round your f anwer to the nearest dolar) e is 50 years. What is the Depreciation Expense for the year ending December 31, 2012, the company uses the OA $33333 OB. 545.000 OG $30,000 OD 5000

Answer 1

The correct answer is OPTION D i.e $30,000.

Depreciation expenses is first to be calculated for the whole year using the sratight line method and then calculating of depreciation expenses is done for the months in which the equipment was used (8 months).

Further explanation of the above mentioned question is below in form of images :-

- Equipment Purchase on 1 May, 2019. Purchase value = $ 5.000oo. Residual value = $50,000 Estimated Useful life = 10 years. Depreciation Straight for each year line method. using Depreciation - Purchase Value - Residual value Estimated Useful life $ 500,000 - $50.000 - Depreciation each year for - $ 45,000 Now, Depreciation expenses for the year ending December 31, 2019 Depreciation for the whole year is $45,000 Depreciation for = 1 May 2019 to 31 Dec 2019 = 8 months.

Depreciation - $ 45,000 x 8 months 12 months $ 30,000 So, the Depreciation expenses for the year ending 31 December 2019 is $30,000 as the equipment was in use for 8 months only for the year , so depreciation expenses will also be considered for 8 months