Question

On January 1, Noonan Company purchases equipment for $100,000. The equipment is expected to have a useful life of 5 years and will have no value at the end of that period. Noonan allocates the cost equally over the period of use so the depreciation expense that must be recognized for the year is:

Answer 1

Answer:

$20,000

Explanation:

Since the cost is allocated equally, the depreciation expense on the purchased equipment will be calculated as:

                                                                 =  Cost of equipment- Scrap value

                                                                        Useful life

                                                                 =  $100,000 - $0

                                                                        5 years

                                                                = $20,000

Based on the above, the depreciation expense for the year that must be recognized by Noonan Company is $20,000.