Question

Ace Company purchased a machine valued at $310,000 on August 1. The equipment has an estimated useful life of six years or 2.5 million units. The equipment is estimated to have a salvage value of $7,200. Assuming the straight-line method of depreciation, what is the amount of depreciation expense that needs to be recorded at the end of the first year

Answer 1

The amount of depreciation at the end of the first year = $21027.77

Step-by-step explanation:

Given machine cost = $310000

The life of machine = 6 years

Salvage value = $7200

Now find the total depreciation by subtracting the salvage value from the cost of the machine.

Depreciation = Machine cost – salvage value

= 310000 – 7200

= 302800

Total depreciation of 6 years = $302800

Annual depreciation = 302800 / 6 = 50466.66

Since in the first year the machine is used from 1st August to 31st December. So, depreciation = 50466.66 *(5/12) = 21027.77