Question

On January 2, 2019, Kaiman Corporation acquired equipment for $300 000. The estimated life of the equipment is 5 years or 100,000 hours. The estimated residual value is $10,000. What is the balance in Accumulated Depreciation on December 31, 2020, if Kaiman Corporation uses the straight-line method of depreciation? O A. $60.000 OB. 558,000 OC. $120,000 OD. 5116,000

Answer 1

As per straight - line method,

depreciation expense per year = (cost of equipment - estimated salvage value) / life of equipment (years)

depreciation expense per year = ($300,000 - $10,000) / 5

depreciation expense per year = $290,000 / 5

depreciation expense per year = $58,000

Accumulated Depreciation on December 31, 2020 shall contain depreciation for 2019 and 2020 i.e. 2 years

Accumulated Depreciation on December 31, 2020 = $58,000 * 2

Accumulated Depreciation on December 31, 2020 =$116,000

hence, the correct answer is D. $116,000