company purchased factory equipment on June 1, 2013, for $80,000. It is estimated that the equipment will have a $5,000 salvage value at the end of its 10-year useful life. Using the straight-line method of depreciation, the amount to be recorded as depreciation expense at December 31, 2013, is A. $7,500. B. $3,125. C. $3,750. D. $4,375.

The correct answer is D.

Explanation:

Giving the following information:

The company purchased factory equipment on June 1, 2013, for $80,000. It is estimated that the equipment will have a $5,000 salvage value at the end of its 10-year useful life.

Under the straight-line method of depreciation, we need to use the following formula to calculate the annual depreciation:

Annual depreciation = (original cost - salvage value) / estimated life (years)

Annual depreciation = (80,000 - 5,000) / 10 = 7,500

Now, we need to calculate the depreciation for 7 months:

Depreciation expense 2013 = (7,500/12) * 7 = $4,375