Question

On January 1, Year One, the Rhode Island Redbirds organization purchased new workout equipment for its athletes. The equipment had a cost of $15,600, transportation costs of $450, and set-up costs of $290. The Redbirds spent an additional $350 training their athletes on the proper use of this equipment. The expected useful life is five years. No residual value is anticipated. How much accumulated depreciation should the Redbirds report after two years if the straight-line method is used?

a. $6,240

b. $6,420

c. $6,536

d. $6,676

Answer 1

The accumulated depreciation of the workout equipment after two years is $6,536 (option c), calculated using the straight-line method by first summing the total cost of the equipment and dividing it by its useful life.

Step-by-step explanation:

To determine the amount of accumulated depreciation the Rhode Island Redbirds would report after two years using the straight-line method, we first calculate the total cost of the equipment. This includes the purchase price plus all ancillary costs. The total cost is $15,600 (equipment) + $450 (transportation) + $290 (set-up), which equals $16,340. The cost of training is not included as it is an operational expense, not a capital expenditure.

Next, using the straight-line method of depreciation, we divide the total cost by the expected useful life of the equipment. Hence, annual depreciation is $16,340 / 5 years = $3,268 per year. After two years, the accumulated depreciation is $3,268 per year x 2 years = $6,536.

Therefore the correct option in the final answer for the accumulated depreciation after two years is c. $6,536.