Question

On April 1, 2016, Cyclone's Backhoe Co. purchases a trencher for $286,000. The machine is expected to last five years and have a salvage value of $43,000. Compute depreciation expense for both years ending December 2016 and 2017 assuming the company uses the straight-line method.

Answer 1

2016 - $36,450

2017 - $48,600

Step-by-step explanation:

Straight line depreciation expense = (Cost of asset - Salvage value) / useful life

($286,000 - $43,000) / 5 = $48,600

the depreciation expense each year would be $48,600 except in 2016 because it the machine was only used for 9 months

Depreciation expense in 2016 = (9 / 12) x $48,600 = $36,450