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29 July, 01:38

On June 1, Aaron 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 and 30,000 hours, which ends on December 31. Using straight-line depreciation, calculate depreciation expense for the final (partial) year of service. (A) 40,000 (B) 17,500 (C) 30,000 (D) 12,500

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  1. 29 July, 05:13
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    It is $30,000 (C)

    Explanation:

    Depreciable cost = $90,000

    Using straight-line method,

    Annual depreciation = $90,000/3

    = $30,000.

    Hence, depreciation expense at the final year of service is $30,000

    We cannot make use of entire cost of equipment of $120,000 because it seemed the company wanted to sell its scrap value for $30,000. Hence, this has been used to reduced it cost to $90,000 which is a depreciable cost.
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