On October 1, 2022, Pharoah Company places a new asset into service. The cost of the...

On October 1, 2022, Pharoah Company places a new asset into service. The cost of the asset is $96500 with an estimated 5-year life and $21500 salvage value at the end of its useful life. What is the depreciation expense for 2022 if Pharoah Company uses the straight-line method of depreciation?

$4825.

$3750.

$19300.

$9650.

Expert Solution

Working

A	Cost	$ 96,500.00
B	Residual Value	$ 21,500.00
C=A - B	Depreciable base	$ 75,000.00
D	Life [in years]	5
E=C/D	Annual SLM depreciation	$ 15,000.00

>No of months the machine was used in 2022 = 3 months (Oct, Nov and Dec)

Depreciation expense of 2022 = $ 15000 x 3 / 12 = $ 3750
Correct Answer = Option #2: $ 3750

ekkarill92 answered 3 years ago

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