Question

On June​ 30, 2016, Colora Printers purchased a printer for $55,000. It expects the printer to...

On June​ 30, 2016, Colora Printers purchased a printer for $55,000. It expects the printer to last for four years and have a residual value of $5,000. Compute the depreciation expense on the printer for the year ended December​ 31, 2016, using the straight−line method.​ (Round any intermediate calculations to two decimal​ places, and your final answer to the nearest​ dollar.)

a. $13,750

b. $12,500

c. $6,250

d. $7,292

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Answer #1

Cost of asset = 55,000

Salvage value = 5,000

Useful life = 4 years

Annual depreciation = ( Cost - Salvage value )/ Useful life

= (55,000 - 5,000)/4

= $12,500

As the asset is purchased exactly at the mid of the year therefore half year convention will be applied and only half of the annual depreciation will be the depreciation expense for the year December 31,2016.

Therefore the depreciation expense will be

= 12,500/2

= $6,250

Therefore the correct option is C

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