Question

A company purchased new furniture at a cost of $14000 on September 30. the furniture is estimated to have a uselful life of 8 years and a salvage value of $2000. the company uses the straight-line method of depreciation. what is the book value of the furniture on december 31 of the first year?
a) $12250
b)$13625
c)$12500
d)$13562.50

Answer 1

Correct answer----------b)$13625

Working

Straight line Method
A	Cost	$ 14,000
B	Residual Value	$ 2,000
C=A - B	Depreciable base	$ 12,000
D	Life [in years left ]	8
E=C/D	Annual SLM depreciation	$ 1,500

.

Depreciation schedule-Straight line method
Year	Book Value	Depreciation expense	Accumulated Depreciation	Ending Book Value
1	$          14,000.00	$                   375.00*	$                   375.00	$              13,625.00

*Depreciation is for 3 months only