Concept #1: Introduction to Depreciation

Concept #2: Straight Line Depreciation

Example #1: Straight Line Method Through Life of Asset

Practice: ABC Company purchased a new machine on January 1, Year 1 for $44,000. The company expects the machine to last ten years. The company thinks it could sell the scrap metal from the machine for $4,000 at the end of its useful life. If the company uses the straight-line method for depreciation, what will be the net book value of the machine on December 31, Year 4?

Practice: DBQ Company purchased a machine on January 1, Year 1 for $60,000. The company estimated a five year useful life and $8,000 residual value. If the company uses the straight-line method for depreciation, what will be the amount of accumulated depreciation on December 31, Year 2?

Additional Problems
Equipment worth $100,000 with a useful life of 10 years is purchased on 1/1/13. Using straightline depreciation, what journal entry needs to be recorded at year-end 12/31/13 if no adjusting entries have been recorded throughout the year? a. Debit depreciation expense and credit accumulated depreciation in the amount of $10,000 for each account. b. Debit depreciation expense and credit accumulated depreciation in the amount of $833 for each account. c. Debit accumulated depreciation and credit accumulated depreciation in the amount of $833 for each account. d. Debit depreciation expense and credit accumulated depreciation in the amount of $100,000 for each account.
The difference between the balance of a plant asset account and the related accumulated depreciation account is termed a. market value. b. contra asset. c. book value. d. liability. e. none of the options listed
On January 1, 20x5 your company purchased a new piece of equipment for $40,000. You estimate that you will use the equipment for 5 years and then sell it for $10,000. Using the straight-line method, depreciation expense for 20x7 would be: a.    $ 8,000 b.    $ 6,000 c.    $ 5,000 d.    $ 4,000 e.    Some other number
A machine was originally purchased at a cost of $90,000. The machine had an estimated useful life of 10 years and been depreciated using the straight-line method for the past five years. At the end of the 6th year, after any adjusting entries, what is the book value of the machine? a. $45,000 b. $54,000 c. $36,000 d. $81,000
On January 1, A Company purchased an oven for $2,000. The oven was expected to last five years and has no salvage value. The adjusting entry made on December 31, to record the depreciation of the oven for one year is: a. Dr Depreciation expense        400       Cr Accumulated depreciation 400 b. Dr Depreciation expense        400       Cr Equipment                         400 c. Dr Accumulated depreciation  400      Cr Depreciation expense        400 d. Dr Depreciation expense        500      Cr Accumulated depreciation  500