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4 June, 21:20

On January 1, Year 1, Anon Company paid $110,000 cash to purchase equipment. The equipment had an expected useful life of six years and an estimated salvage value of $8,000. Assuming that Anon depreciates its assets using the straight-line method of depreciation, the amount of depreciation expense appearing on the Year 4 income statement and the amount of accumulated depreciation appearing on the December 31, Year 4, balance sheet would be: Depreciation expense Accumulated depreciation A. $ 17,000 $ 17,000 B. $ 17,000 $ 68,000 C. $ 68,000 $ 17,000 D. $ 17,000 $ 51,000

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  1. 4 June, 21:36
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    B. Depreciation expense: $17,000 Accumulated expense: $68,000

    Explanation:

    Depreciation is the reduction in the value of an asset over time. Usually caused due to wear and tear. Straight-line depreciation is when the same amount is reduced as depreciation every year.

    If the asset was valued at $110,000 and the residual value is $8000, then the total depreciation value over time is $110,000 - $8000 = $102,000.

    The asset was used for 6 years, thus annual depreciation is $102,000 / 6 = $17,000.

    The depreciation expense for the 4th year would be $17,000 which would be shown in the income statement.

    The accumulated depreciation shown in the balance sheet would contain the total depreciation amounts of all 4 years (4 x $17000). Hence, being $68,000.
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