DBQ Company purchased a machine on January 1, Year 1 for \$60,000. The company estimated a five year useful life and \$8,000 residual value. If the company uses the straight-line method for depreciation, what will be the amount of accumulated depreciation on December 31, Year 2?

• A. \$10,400
• B. \$12,000
• C. \$20,800
• D. \$24,000

Answer: (C)

Verified step by step guidance

1. Identify the cost of the machine, which is \$60,000, and the residual value, which is \$8,000.
2. Determine the useful life of the machine, which is estimated to be 5 years.
3. Calculate the annual depreciation expense using the straight-line method with the formula: \( \text{Annual Depreciation} = \frac{\text{Cost} - \text{Residual Value}}{\text{Useful Life}} \).
4. Substitute the given values into the formula: \( \text{Annual Depreciation} = \frac{60,000 - 8,000}{5} \).
5. To find the accumulated depreciation by December 31, Year 2, multiply the annual depreciation by 2 (since it is the end of the second year).