Question

Equipment with a cost of $634800 has an estimated salvage value of $30000 and an estimated life of 4 years or 14400 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 for 3600 hours?

Answer 1

$151,200

Explanation:

According to the problem, calculation of the given data are as follows,

Cost of Equipment = $634,800

Salvage Value = $30,000

Estimated Life = 4 years

So, we can calculate depreciation for first year by using following formula,

Amount of depreciation = Depreciable base amount ÷ Estimated Life

Where, Depreciable base amount = Cost of Equipment - Salvage Value

= $634,800 - $30,000 = $604,800

By putting the value, we get

Amount of depreciation = $604,800 ÷ 4

= $151,200