Question

Bates Company purchased equipment on January 1, 2006, at a total invoice cost of $600,000. The equipment has an estimated salvage value of $15,000 and an estimated useful life of 5 years. What is the amount of accumulated depreciation at December 31, 2007, if the straight-line method of depreciation is used?a. $120,000b. $240,000c. $117,000d. $234,000

Answer 1

d. $234,000

Step-by-step explanation:

The computation of the depreciation expense for one year under the straight line method is shown below:

= (Original cost - residual value) ÷ (useful life)

= ($600,000 - $15,000) ÷ (5 years)

= ($585,000) ÷ (5 years)

= $117,000

For two years, the accumulated depreciation would be

= $117,000 × 2 years

= $234,000

The two year is calculated from January 1, 2006 to December 31, 2007