Question

On June 30, a machine with a useful life of 10 years and a residual value of $10,000 was purchased for $75,000. What is the depreciation expense for year 2 under straight line depreciation? A. 6,500 B. 13,000 Not sure if the question is looking for just the expense for year 2 which would be $6,500, or the accumulated depreciation expense of all the years up until year 2 which would then be $13,000.

Answer 1

Correct answer---$6500

The question is asking for Depreciation expense for year 2.Accumulated depreciation upto year 2 will not be $13000 it will be $9750 because in year 1 depreciation will be charged for only half year from July to Dec.

Straight line Method
A	Cost	$ 75,000.00
B	Residual Value	$ 10,000.00
C=A - B	Depreciable base	$ 65,000.00
D	Life [in years left ]	10
E=C/D	Annual SLM depreciation	$    6,500.00

Year	Book Value	Depreciation expense	Ending Book Value	Accumulated Depreciation
1	$        75,000.00	$    3,250.00	$     71,750.00	$          3,250.00
2	$        71,750.00	$    6,500.00	$     65,250.00	$          9,750.00
3	$        65,250.00	$    6,500.00	$     58,750.00	$        16,250.00
4	$        58,750.00	$    6,500.00	$     52,250.00	$        22,750.00
5	$        52,250.00	$    6,500.00	$     45,750.00	$        29,250.00
6	$        45,750.00	$    6,500.00	$     39,250.00	$        35,750.00
7	$        39,250.00	$    6,500.00	$     32,750.00	$        42,250.00
8	$        32,750.00	$    6,500.00	$     26,250.00	$        48,750.00
9	$        26,250.00	$    6,500.00	$     19,750.00	$        55,250.00
10	$        19,750.00	$    6,500.00	$     13,250.00	$        61,750.00
11	$        13,250.00	$    3,250.00	$     10,000.00	$        65,000.00