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Cardco Inc

Accounting

Cardco Inc. has an annual accounting period that ends on December 31. During the current year a depreciable asset that cost $42,000 was purchased on September 2. The asset has a $4,000 estimated salvage value. The company uses straight-line depreciation and expects the asset to have a five-year life. What is the total depreciation expense for the current year?

 

A. $1,900.00

B. $7,600.00

C. $2,533.33

D. $2,800.00

E. $3,166.67

 

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Answer:

C .

Step-by-Step explanation

Since the asset is used for 4 months in the current year, calculate the depreciation in the current year for 4 months as follow:

 

Depreciation = [(Cost - Salvage value) ?÷? Estimated life] ?×? 4 months ?÷? 12 months

                    = [($42,000 - $4,000) ?÷? 5 years] ?×? 4 ?÷? 12

                    = $7,600 ?×? 4 ?÷? 12

                    = $2,533.33

Thus, the depreciation expense in the current year is $2,533.33

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