Question

The company purchased $15,000 of equipment on January 1. The equipment has a three-year useful life and a $600 salvage value. The company uses the straight-line method of depreciation. What is the balance in accumulated depreciation on March 31?

Answer 1

Answer:

$1,200

Explanation:

Cost of the equipment purchased = $15,000

Useful life of the machine = 3 years

Salvage value = $600

Now,

Using the straight line method of depreciation

Annual depreciation = $\frac{\textup{Cost-Salvage value}}{\textup{Useful life}}$

= $\frac{\textup{15,000-600}}{\textup{3}}$

or

= $4,800 per year

Now total duration from January 1 to March 31 = 3 months or $\frac{3}{12}$ years

= 0.25 year

Therefore,

The accumulated depreciation = Annual depreciation × Duration

= $4,800 × 0.25

= $1,200