**Depreciation Calculation Using Straight-Line Method**On June 1, 2018, KJ Corporation acquired equipment for $360,000. The estimated useful life of the equipment is 5 years or 40,000 hours. The estimated residual value is $30,000. What is the book value of the asset on December 31, 2020, if KJ Corporation uses the straight-line method of depreciation?**Options:**- $189,500- $162,000- $144,000- $174,000- $184,000**Explanation of Calculation:**To find the book value using the straight-line method, follow these steps:1. **Calculate Depreciable Amount:** - Cost of Equipment: $360,000 - Residual Value: $30,000 - Depreciable Amount = Cost - Residual Value = $360,000 - $30,000 = $330,0002. **Calculate Annual Depreciation:** - Useful Life: 5 years - Annual Depreciation = Depreciable Amount / Useful Life = $330,000 / 5 = $66,000 per year3. **Calculate Total Depreciation by December 31, 2020:** - Time from June 1, 2018, to December 31, 2020: 2.5 years - Total Depreciation = Annual Depreciation * 2.5 = $66,000 * 2.5 = $165,0004. **Calculate Book Value on December 31, 2020:** - Book Value = Cost of Equipment - Total Depreciation = $360,000 - $165,000 = $195,000However, it seems the closest option is $189,500, which may suggest rounding or different interpretation of the time period occurred. It is essential to verify calculations and data interpretation for precise results.

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Description: **Depreciation Calculation Using Straight-Line Method**On June 1, 2018, KJ Corporation acquired equipment for $360,000. The estimated useful life of the equipment is 5 years or 40,000 hours. The estimated residual value is $30,000. What is the book

Depreciation is the reduction in the value of fixed assets due to the usage and passage of time or obsolescence. It can be calculated using different methods: straight-line, double decline, the sum of the year's digits, double declining balance method, etc. The book value is the difference between equipment cost and the accumulated depreciation.Calculate the depreciation of the equipment as per the straight-line method of depreciation: Annual Depreciation=Cost - Residual ValueUseful Life=$360,000-$30,0005=$66,000 Compute the book value of the asset as on December 31, 2020: The formula snip is as follows: The result of the above is as follows:Thus, the correct answer is option a, i.e $189,500.

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On June 1. 2018. KJ Corporation acquired equipment for $360,000. The estimated useful life of th equipment is 5 years or 40,000 hours. The estimated residual value is $30,000. What is the book value of the asset on December 31, 2020, if KJ Corporation uses the straight-line method of depreciation? $189.500 $162.000 $144.000 $174.000 $184.000

On June 1. 2018. KJ Corporation acquired equipment for $360,000. The estimated useful life of th equipment is 5 years or 40,000 hours. The estimated residual value is $30,000. What is the book value of the asset on December 31, 2020, if KJ Corporation uses the straight-line method of depreciation? $189.500 $162.000 $144.000 $174.000 $184.000

FINANCIAL ACCOUNTING

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ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Concept explainers

Depreciation Methods

The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.

Depreciation Accounting

In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.

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Question

**Depreciation Calculation Using Straight-Line Method**

On June 1, 2018, KJ Corporation acquired equipment for $360,000. The estimated useful life of the equipment is 5 years or 40,000 hours. The estimated residual value is $30,000. What is the book value of the asset on December 31, 2020, if KJ Corporation uses the straight-line method of depreciation?

**Options:**

- $189,500
- $162,000
- $144,000
- $174,000
- $184,000

**Explanation of Calculation:**

To find the book value using the straight-line method, follow these steps:

1. **Calculate Depreciable Amount:**
- Cost of Equipment: $360,000
- Residual Value: $30,000
- Depreciable Amount = Cost - Residual Value = $360,000 - $30,000 = $330,000

2. **Calculate Annual Depreciation:**
- Useful Life: 5 years
- Annual Depreciation = Depreciable Amount / Useful Life = $330,000 / 5 = $66,000 per year

3. **Calculate Total Depreciation by December 31, 2020:**
- Time from June 1, 2018, to December 31, 2020: 2.5 years
- Total Depreciation = Annual Depreciation * 2.5 = $66,000 * 2.5 = $165,000

4. **Calculate Book Value on December 31, 2020:**
- Book Value = Cost of Equipment - Total Depreciation = $360,000 - $165,000 = $195,000

However, it seems the closest option is $189,500, which may suggest rounding or different interpretation of the time period occurred. It is essential to verify calculations and data interpretation for precise results.

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