The depreciation expense under the straight-line method for 2025 is $2,400, and for 2026 is $9,600.
How to calculate the depreciation expense
To calculate the depreciation expense using the straight-line method for 2025 and 2026, determine the depreciable cost and the annual depreciation.
Depreciable Cost:
The depreciable cost is calculated by subtracting the salvage value from the initial cost of the machine.
Depreciable Cost = Cost of Machine - Salvage Value
Depreciable Cost = $83,200 - $6,400
Depreciable Cost = $76,800
Annual Depreciation:
The annual depreciation is calculated by dividing the depreciable cost by the useful life of the machine.
Annual Depreciation = Depreciable Cost / Useful Life
Annual Depreciation = $76,800 / 8 years
Annual Depreciation = $9,600 per year
For 2025:
Assuming the machine was purchased on October 1, 2025, the machine was used for 3 months (October, November, December).
Depreciation Expense for 2025 = Annual Depreciation * (Months Used / 12)
Depreciation Expense for 2025 = $9,600 * (3 / 12)
Depreciation Expense for 2025 = $2,400
For 2026:
The machine will be used for the entire year.
Depreciation Expense for 2026 = Annual Depreciation
Depreciation Expense for 2026 = $9,600
Therefore, the depreciation expense under the straight-line method for 2025 is $2,400, and for 2026 is $9,600.
Suppose that Pharoah purchased a new machine on October 1, 2025 at a cost of $83,200. The company estimated that the machine has a salvage value of $6,400. The machine is expected to be used for 64,000 working hours during its 8 -year life. Compute depreciation using the following methods in the year indicated. (a) Straight-line for 2025 and 2026, assuming a December 31 year-end.