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.)

Answer 1

Annual depreciation= $10,160 a year

Step-by-step explanation:

Giving the following information:

Ivanhoe Company purchased a new machine on October 1, 2017, for $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.

Annual depreciation= (original cost - salvage value)/estimated life (years)

Annual depreciation= (77,980 - 6,860)/7= $10,160 a year