Question

On june 1, michael company purchased equipment at a cost of $120,000 that has a depreciable cost of $90,000 and an estimated useful life of 3 years or 30,000 hours. using straight-line depreciation, calculate depreciation expense for the second year.
a. $17,500
b. $30,000
c. $40,000
d. $12,500

Answer 1

Cost of equipment = $120,000
Depreciable cost = $90,000
Useful life = 3 years or 30,000 hours of operation

Depreciation per year = Depreciable cost/3 = 90,000/3 = $30,000

Yr 1 depreciation expense = $30,000
Yr 2 depreciation expense = $30,000
Yr 3 depreciation expense = $30,000

Therefore, the correct answer is b.