Question

Jay Hawk, maintenance supervisor for Boston Insurance Co., has purchased a riding lawnmower and accessories to be used in maintaining the grounds around corporate headquarters. He has sent the following information to the accounting department. Cost of mower and Date purchased 7/1/12 accessories $4,000 Monthly salary of Estimated useful life 5 yrs groundskeeper $1,100 Salvage value $0 Estimated annual fuel cost $150 Compute the amount of depreciation expense (related to the mower and accessories) that should be reported on Boston's December 31, 2012, income statement. Assume straight-line depreciation.

Answer 1

The depreciation will be for 400

Step-by-step explanation:

4,000 acquired on 7/01/12

At December 31th we will do depreciation for the 6 month in the company's possession.

purchase cost / useful life

4,000/5 = 800 per year

Then 800 / 12 months = 66.67 per month

Then, we multiply by 6 months: 66.67 x 6 = 399.99 = 400

This will be the depreciation expense for the half year.

The salary for the employee and the annual maintenance cost are not depreciation for the machine. The accesories do, as they improve the machine conditions to generate cash.