Question

Super Saver Groceries purchased store equipment for $29,500. Super Saver estimates that at the end of its 10-year service life, the equipment will be worth $3,500. During the 10-year period, the company expects to use the equipment for a total of 13,000 hours. Super Saver used the equipment for 1,700 hours the first year.

Required:
Calculate depreciation expense for the first year, using each of the following methods. Round all amounts to the nearest dollar.
1. Straight-line.
2. Double-declining-balance.
3. Activity-based.

Answer 1

a. $2,600

b. $5,900

c. $3400

Step-by-step explanation:

straight line depreciation =( cost of asset - salvage value ) / useful life

($29,500 - $3500) / 10 = $2,600

Double declining = 2 x ( cost of asset / useful life )

(2 x $29,500) / 10 = $5,900

Activity based = ( hours used in year / total number of hours) x (cost of asset - salvage value)

(1700 / 13000) x ($29,500 - $3500) =$3400