Question

Lockard Company purchased machinery on January 1, 2010 for 80,000. The machinery is estimated to have a salvage value of $8,000 after a useful life of 8 years.

A) Compute 2010 depreciation expense using the straight-line method.
B) Compute 2010 depreciation using method assuming the machinery was purchased on September 1,2010

Answer 1

a. $9,000

b. $3,000

Step-by-step explanation:

The computation of the depreciation expense is shown below:

a.

= (Purchase value of machinery - estimated salvage value) ÷ (useful life)

= ($80,000 - $8,000) ÷ (8 years)

= ($72,000) ÷ (8 years)

= $9,000

b. The asset is purchased on September 1,2010 , so the depreciation expense should be charged for four months i.e From September to December.

We assume the books are closed on December 31, 2010

So, the depreciation would be

= $9,000 × 4 months ÷ 12 months

= $3,000