Cramer Company purchased equipment on May 1, 2019 for $200,000. The residual value is $20,000 and the estimated useful life is 10 years. What is the Depreciation Expense for the year ending December 31, 2019, if the company uses the straight-line method? (Round your final answer to the nearest dollar.)

Depreciation expense 2019 = $12,000

Explanation:

Giving the following information:

Cramer Company purchased equipment on May 1, 2019, for $200,000. The residual value is $20,000 and the estimated useful life is 10 years.

Under the straight-line method of depreciation, we need to use the following formula to calculate the annual depreciation:

Annual depreciation = (original cost - salvage value) / estimated life (years)

Annual depreciation = (200,000 - 20,000) / 10 = 18,000

Now, we need to calculate the depreciation for 8 months:

Depreciation expense 2019 = (18,000/12) * 8 = $12,000