Question

Required information Use the following information for the Exercises below. The following information applies to the questions displayed below) On April 1. Cyclone's Co. purchases a trencher for $320,000. The machine is expected to last five years and have a salvage value of $60,000 Exercise 10-11 Straight-line, partial-year depreciation LO C2 Compute depreciation expense at December 31 for the first and second year assuming the company uses the straight-line method. Choose Numerator: Choose Denominator: Annual Depreciation Annual depreciation Depreciation Year Annual Depreciation Fraction of Year - First year

Answer 1

10-11)

Straight-Line Depreciation
	Choose Numerator	/	Choose Denominator	=	Annual Depreciation
	Depreciable Value	/	Number of Years of Useful Life	=	Annual Depreciation
	$320,000	/	5	=	$64,000
Year	Annual Depreciation		Fraction of Year	=	Depreciation Expense
First year	$64,000	*	9/12 months or 0.75	=	$48,000
Second Year	$64,000	*	1	=	$64,000

Therefore, annual depreciation expense for the first year and remaining four years is $64,000 each year because the depreciation for each year is same under straight-line method, however, the asset is placed in April so only 9 months used so first year depreciation is for 9 months but for remaining four years, it is $64,000 each year.

Working notes:

Depreciable Value = Cost of the Asset - Salvage Value

= $320,000 - $60,000

= $260,000

Note: As per HOMEWORKLIB RULES, the first question should be answered, hence, please post the second question separately. Please do not give a thumb down for not answering both the questions as i have followed the HOMEWORKLIB RULES.