Question

On October 1, 2021, the Allegheny Corporation purchased equipment for $157,000. The estimated service life of the equipment is 10 years and the estimated residual value is $3,000. The equipment is expected to produce 350,000 units during its life.

Calculate depreciation for 2021 and 2022 using each of the following methods. Partial-year depreciation is calculated based on the number of months the asset is in service.

1. straight line

Straight-Line Depreciation
Choose numerator: / Choose Denominator: = Annual Depreciation
/ = Annual Depreciation
/ =
Year Annual Depreciation x Fraction of Year Depreciation expense
2021 x =
2022 x =

Answer 1

Instructions are below.

Step-by-step explanation:

Giving the following information:

Purchasing price= $157,000.

The estimated service life of the equipment is 10 years.

Residual value= $3,000

To calculate the depreciation expense under the straight-line method, we need to use the following formula:

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

Annual depreciation= (157,000 - 3,000)/10

Annual depreciation= 15,400

2021:

Annual depreciation= (15,400/12)*3= $3,850

2022:

Annual depreciation= 15,400