Question

Q7.9 Gamma Hospital purchased a new item of equipment for $40,000 on May 1, 20X1. The equipment has an estimated useful life of ten years and an expected salvage value of $4,000. What amount should be reported as accumulated depreciation on this equipment in Gamma Hospital’s December 31, 20X2, balance sheet?

Answer 1

Answer:

Cost of Equipment = $40,000

Depreciation = (Cost of Equipment – Salvage Value) / Useful Life
Depreciation = ($40,000 - $4,000) / 10
Depreciation = $36,000 / 10
Depreciation = $3,600

Depreciation per month = Depreciation / 12
Depreciation per month = $3,600 / 12
Depreciation per month = $300

Accumulated Depreciation = Depreciation of 20X1 + Depreciation of 20X22
Accumulated Depreciation = $300 * 8 + $300 *12
Accumulated Depreciation = $2,400 + $3,600
Accumulated Depreciation = $6,000