Multiple Choice
Which of the following correctly states the formula for annual straight-line depreciation expense (assuming no change in estimates)?
8
views
8. Long Lived Assets
Depreciation: Straight Line
Multiple Choice
DBQ Company purchased a machine on January 1, Year 1 for \$60,000. The company estimated a five year useful life and \$8,000 residual value. If the company uses the straight-line method for depreciation, what will be the amount of accumulated depreciation on December 31, Year 2?
A
\$10,400
B
\$12,000
C
\$20,800
D
\$24,000
Verified step by step guidance1
Identify the cost of the machine, which is \$60,000, and the residual value, which is \$8,000.
Determine the useful life of the machine, which is estimated to be 5 years.
Calculate the annual depreciation expense using the straight-line method with the formula: \( \text{Annual Depreciation} = \frac{\text{Cost} - \text{Residual Value}}{\text{Useful Life}} \).
Substitute the given values into the formula: \( \text{Annual Depreciation} = \frac{60,000 - 8,000}{5} \).
To find the accumulated depreciation by December 31, Year 2, multiply the annual depreciation by 2 (since it is the end of the second year).
Related Videos
Related Practice
