Question

Gotham Company purchased a new machine on October 1, 2022, at a cost of $90,000. The company estimated that the machine has a salvage value of $8,100. The machine is expected to be used for 70,000 working hours during its 10-year life.

Compute the depreciation expense under the straight-line method for 2022 and 2023, assuming a December 31 year-end. (Round answers to 2 decimal places, e.g. 5,275.25.)

		2022		2023
The depreciation expense under the straight-line method		$		$

Answer 1

Solution

	2022	2023
The depreciation expense under the straight-line method	$ 2,047.50	$ 8,190

Working

Straight line Method
A	Cost	$ 90,000
B	Residual Value	$ 8,100
C=A - B	Depreciable base	$ 81,900
D	Life [in years left ]	10
E=C/D	Annual SLM depreciation	$               8,190.00

.

Depreciation schedule-Straight line method
Year	Book Value	Depreciation expense	Accumulated Depreciation	Ending Book Value
2022	$          90,000.00	$               2,047.50*	$                2,047.50	$              87,952.50
2023	$          87,952.50	$               8,190.00	$             10,237.50	$              79,762.50

*8100/12 x 3