Question

The samuel company uses the straight-line method to depreciate its equipment. on may 1, 2015, the company purchased some equipment for $224,000. the equipment is estimated to have a useful life of ten years and a salvage value of $20,000. on december 31, 2015, how much depreciation expense should samuel record for the equipment in the adjusting entry

Answer 1

Answer: Samuel company will record $20,400  as depreciation for the equipment in the adjusting entry.

We follow these steps to arrive at the answer:

We have

Cost of the equipment : $224,000

Salvage value                : $20,000

Useful life                       : 10 years

Since the company uses Straight-line method of depreciation, we can find the value of depreciation with the following formula:

$Depreciation = \frac{(Cost of the asset - Salvage Value)}{Useful life (in years)}$

In the formula above, the numerator (Cost of the asset - Salvage Value) is also known as the asset's depreciable cost.

Substituting the values from the question in the formula above, we get,

$Depreciation = \frac{(224000 - 20000)}{10}$

$Depreciation = \frac{(204000)}{10}$

$Depreciation = 20,400$