A Company Purchased Factory Equipment on May 1, 2012 for $30,000

question 121

Multiple Choice

A company purchased factory equipment on May 1, 2012 for $30,000. It is estimated that the equipment will have a $4,200 residual value at the end of its 8-year useful life. Using straight-line depreciation, the depreciation expense for calendar 2012 is

• A)$3,750.
• B)$3,225.
• C)$2,500.
• D)$2,150.

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Definitions:

Straight-Line Depreciation

A method of calculating the depreciation of an asset, where the asset's cost is reduced equally over its useful life.

Payback Period

The length of time it takes for an investment to generate enough cash flow to recover its original cost, a measure of investment risk.

Investment Project

A project that allocates capital with the aim of generating returns over time, often involving infrastructure, real estate, or other assets.

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life in equal annual increments.