Caruso Company purchased equipment on January 1 at a total invoice cost of $400,000. The equipment has an estimated salvage value of $10,000 and an estimated useful life of 5 years. What is the amount of accumulated depreciation at the end of the second year if the straight-line method of depreciation is used?

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26 August, 19:26

Caruso Company purchased equipment on January 1 at a total invoice cost of $400,000. The equipment has an estimated salvage value of $10,000 and an estimated useful life of 5 years. What is the amount of accumulated depreciation at the end of the second year if the straight-line method of depreciation is used?

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Claudia Tanner · Answer 1

The amount of accumulated depreciation at the end of the second year is $156,000.

Explanation:

Determining the depreciation base = 400,000 - 10,000

The depreciation base = 390,000.

Determining the depreciation rate = depreciation base/useful life

The depreciation rate = 390,000/5

The depreciation rate = 78,000.

Depreciation for the two years = Depreciation rate * No. of years (which is 2)

Depreciation for the two years = 78,000 * 2

Depreciation for the two years = $156,000.