A company purchased office equipment for $130,000 on March 1, 2024. The estimated service life is four years with a $40,000 residual value. The company records partial-year depreciation based on the number of months in service. The balance of accumulated depreciation as of December 31, 2025, using straight-line depreciation, is:Multiple Choice$22,500.$41,250.$18,750.$88,750.
Question
A company purchased office equipment for 40,000 residual value. The company records partial-year depreciation based on the number of months in service. The balance of accumulated depreciation as of December 31, 2025, using straight-line depreciation, is:Multiple Choice41,250.88,750.
Solution
To solve this problem, we first need to calculate the annual depreciation expense.
Step 1: Calculate the depreciable base. Depreciable base = Cost of asset - Residual value Depreciable base = 40,000 = $90,000
Step 2: Calculate the annual depreciation expense. Annual depreciation expense = Depreciable base / Service life Annual depreciation expense = 22,500 per year
Step 3: Calculate the accumulated depreciation as of December 31, 2025. The equipment was purchased on March 1, 2024, so it was in service for 10 months in 2024 and 12 months in 2025. Therefore, the accumulated depreciation as of December 31, 2025, is the sum of the depreciation for these 22 months.
Accumulated depreciation = (10/12 * 22,500) Accumulated depreciation = 22,500 = $41,250
So, the balance of accumulated depreciation as of December 31, 2025, using straight-line depreciation, is $41,250.
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