Question

Novak Company purchased a new machine on October 1, 2020, at a cost of $110,100. The company estimated that the machine will have a salvage value of $10,100. The machine is expected to be used for 10,000 working hours during its 4-year life.

(a)

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Compute the depreciation expense under straight-line method for 2020. (Round answer to 0 decimal places, e.g. 2,125.)

		2020
Depreciation expense		$enter a dollar amount rounded to 0 decimal places

Answer 1

Solution

	2020
Depreciation expense	$ 6,250

Working

Straight line Method
A	Cost	$ 110,100
B	Residual Value	$ 10,100
C=A - B	Depreciable base	$ 100,000
D	Life [in years left ]	4
E=C/D	Annual SLM depreciation	$ 25,000.00

Depreciation for a year is 25000 but in 2020 depreciation will be recorded for only 3 months.......25000/12 x 3=$6250