Question

Equipment with a cost of $225,000 has an estimated salvage value of $15,000 and an estimated life of 4 years or 10,000 hours. It is to be depreciated by the straight-line method. What is the amount of depreciation for the first full year, during which the equipment was used 2,700 hours?

Answer 1

The depreciation is $52,500

Step-by-step explanation:

The formula to compute the depreciation under the straight-line method is shown below:

=
`((original\ cost - salvage\ value ))/(Number\ of\ years)`

=
`((\$225,000 - \$15,000))/(4\years)`

= $52,500

Under the straight-line method, the depreciation expense should be the same for the remaining useful life. Life of the equipment or machine should always be expressed in years, not in hours.

So, these usage of hours should be ignored.