Question

A company purchased new furniture at a cost of $19,000 on September 30. The furniture is estimated to have a useful life of 5 years and a salvage value of $2,500. The company uses the straight-line method of depreciation. How much depreciation expense will be recorded for the furniture for the first year ended December 31

Answer 1

Answer: The depreciation expense that will be recorded for the furniture for the first year ended December 31 is $825.

Explanation: Straight-line mwthod of depreciation is:

(Acquisition value minus salvage value) / No of years

Per the question, the acquistion value of the new furniture is $19,000 while the salvage value is $2,500. The number of years is 5 years.

Then yearly depreciation would be ($19,000 - $2,500) / 5 years = $3,300.

Note that the furniture was purchased on September 30. To arrive at the depreciation expense that will be recorded as at December 31, you need to pro rate the yearly depreciation of $3,300.

September 30 to Decemer 31 is 3 months. So the total depreciation expense will be $3,300 * 3 / 12 = $825.