Five-year property costing $25,000 was placed in service on April 11 of the current year. The...

Question:

Five-year property costing $25,000 was placed in service on April 11 of the current year. The property has no salvage value and is depreciated using straight-line. Assuming the company elects not to take advantage of either bonus depreciation or the Code Sec. 179 deduction and the mid-quarter convention applies to all five-year property placed in service this year, what will be depreciation expense with regard to this property for the current year?

Straight-line depreciation:

Under the straight-line depreciation method, the cost of an asset is gradually decreased over its life. The depreciation charged yearly is calculated by dividing the difference of expected salvage value and original cost by the useful life of the asset.

Answer and Explanation:

Calculation of depreciation for the current year:

{eq}\begin{align*}{\rm\text{Depreciation}}\;{\rm\text{expense }} &= \dfrac{{{\rm\text{Original}}\;{\rm\text{cost}}}}{{{\rm\text{Useful}}\;{\rm\text{life}}}}\\ &= \dfrac{{\$ 250,000}}{{5\;{\rm\text{years}}}}\\ &= \$ 50,000\end{align*} {/eq}

The depreciation expense under the straight-line method when the mid-quarter convention applies is $50,000.


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Straight-Line Depreciation: Method, Formula & Example

from Corporate Finance: Help & Review

Chapter 8 / Lesson 2
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