Question

On January 2, Haskins Company purchases a laser cutting machine for use in fabrication of a part for one of its key products. The machine cost $80,000, and its estimated useful life is five years, after which the expected salvage value is $5,000. For both parts (a) and (b) below: (1) Compute depreciation expense for each year of the machine's five-year useful life under that depreciation method. (2) Use the financial statements effects template to show the effect of depreciation for the first year only for that method. (a) Straight-line

Answer 1

Step-by-step explanation:

Cost of machine - $80000

Useful life - 5 years

Salvage value -$5000

Depreciable amount = 80000-5000= 75000

Annual depreciation = 75000/5 = 15000

Year DR Accum Dep

Cost 8000

1 Depreciation 15000 15000

2 Depreciation 15000 30000

Year 3 Depreciation 15000 45000

Year 4 Depreciation 15000 60000

Year 5 Depreciation 15000 75000

Financial statement template

Balanced sheet

Cash asset + Non cash asset = liabilities + Equity

Cash asset + 65000 = liabilities + equity

Income statement

Revenue - expenses = Net income

Revenue - 15000 - Net Income