Use the following information to answer questions 1 & 2. A manufacturing company

Question

Use the following information to answer questions 1 & 2.

A manufacturing company purchased equipment on January 1, 2012 for $732,500 and had an expected useful life of 20 years. As of January 1, 2016, the accumulated depreciation of the equipment was $140,000.

1.      What was the amount of depreciation expense for the year 2016?

a.      140,000

b.      28,000

c.       35,000

d.      36,625

2.      What was the net book value of the equipment on December 31, 2016?

a.      525,500

b.      557,500

c.       592,500

d.      535,500

Explanation / Answer

1. Answer is d.

Annual depreciation = $732,500 / 20 = $33,625.

2. Answer is c.

Net book value = $732,500 - $140,000 = $592,500.

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