On June 1, Scotter 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 first year, which ends on December 31.
$17,500
$12,500
$40,000
$30,000

$17,500

Explanation:

Depreciation is defined as a systematic allocation of the cost of an asset over its useful lifetime using accepted methods like reducing balance , straight line and others.

Depreciable amount is the component cost of an asset that is consumed while the scrap or salvage value is the component of the cost that is left at the completion of the useful lifetime.

Workings

Cost -$120,000

Depreciable cost - $90,000

Purchase date - June 1

Year End - December 31

Time line - 7 months

Useful life - 3yrs / 30000hrs

Depreciation - 90000/3*7/12= $17,499.99

Approximately $17,500

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