Question

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) Your answer is correct.
Straight-line for 2025 and 2026, assuming a December 31 year-end.

Answer 1

To calculate the straight-line depreciation for the machine in 2025, prorate the annual expense of $9,600 for 3 months to get $2,400. For 2026, the full annual expense of $9,600 will be applied.

Step-by-step explanation:

The student's question involves the calculation of depreciation using the straight-line method for a machine purchased by a company. To calculate depreciation for the years 2025 and 2026, we will follow the formula: (Cost of the machine - Salvage value) / Useful life.

First, we determine the annual depreciation expense for the machine:

• Cost of the machine: $83,200
• Salvage value: $6,400
• Useful life: 8 years

Annual Depreciation Expense = ($83,200 - $6,400) / 8 = $76,800 / 8 = $9,600 per year

For the year 2025, since the machine was purchased on October 1, depreciation needs to be prorated for 3 months (October, November, and December). Depreciation for 2025 is computed as follows:

Depreciation for 2025 = $9,600 x (3/12) = $2,400

For the full year of 2026, the full annual depreciation expense of $9,600 will be applied.

Therefore, the depreciation expense recorded for the machine will be $2,400 for the year 2025 and $9,600 for the year 2026.