Question

Pharoah Company purchased a new machine on October 1, 2022, at a cost of $91,360. The company estimated that the machine has a salvage value of $8,000. The machine is expected to be used for 70,200 working hours during its 8-year life. Compute the depreciation expense under the straight-line method for 2022 and 2023, assuming a December 31 year-end.

Answer 1

Answer and Explanation:

The computation is shown below:

Depreciable cost is

= Cost of new machine - salvage value

= $91,360 - $8,000

= $83,360

Now

Depreciation expense:

2022 $2,605 ($83,360 ÷ 8 years ÷ 12 × 3 )

2023 $10,420 ($83,360 ÷ 8 years)

hence, the same is to be considered

Therefore the depreciation expense for the year 2022 and 2023 is $2,605 and $10,420 respectively