Question

Ivanhoe Company purchased a new machine on October 1, 2017, at a cost of $77,980. The company estimated that the machine has a salvage value of $6,860. The machine is expected to be used for 72,900 working hours during its 7-year life. Compute the depreciation expense under the straight-line method for 2017 and 2018, assuming a December 31 year-end. (Round answers to 0 decimal places, e.g. 5,275.) 2017 2018 The depreciation expense under the straight-line method $Enter a dollar amount for year 2017 $Enter a dollar amount for year 2018

Answer 1

Explanation:

Answer 2

2017 - $2,540

2018 - $10,160

Step-by-step explanation:

The computation of the depreciation expense under the Straight-line method is shown below:

= (Original cost - residual value) ÷ (useful life)

= ($77,980 - $6,860) ÷ (7 years)

= ($71,120) ÷ (7 years)

= $10,160

In this method, the depreciation is same for all the remaining useful life.

So, For the year 2017, the depreciation expense would be charged on 3 months i.e from October 1 to December 31

= $10,160 × 3 months ÷ 12 months

= $2,540

So, For the year 2018, the depreciation expense is $10,160