Question

5. Cleveland Resorts purchased equipment for $40,000. Residual value at the end of an estimated four-year service life is expected to be $8,000. The machine operated for 2,200 hours in the first year, 3,600 in the second year, 2,850 in the third year, and 3,350 in the fourth year. The company expects the machine to operate for a total of 12,000 hours over its four-year life. Calculate depreciation expense and the accumulated depreciation of the equipment for the second year using each of the following depreciation methods: (a) straight-line,

Answer 1

Annual depreciation= $8,00

Accumulated depreciation year 2= $16,000

Step-by-step explanation:

Giving the following information:

Cleveland Resorts purchased equipment for $40,000. Residual value at the end of an estimated four-year service life is expected to be $8,000.

Under the straight-line method, the depreciation expense remains constant during the useful life of the equipment. We need to use the following formula:

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

Annual depreciation= (40,000 - 8,000)/4= $8,000

Accumulated depreciation year 2= 8,000*2= $16,000