Question

Wildhorse Co. purchased a new machine on October 1, 2017, at a cost of $88,000. The company estimated that the machine has a salvage value of $8,400. The machine is expected to be used for 71,500 working hours during its 8-year life.
Compute the depreciation expense under the straight-line method for 2017 and 2018, assuming a December 31 year-end. (Round answers to 0 decimal places, e.g. 5,275.)
2017
2018
The depreciation expense under the straight-line method $ $

Answer 1

Answer:

2017: $1,658

2018: $11,608

Explanation:

First, we need to know the value we are going to depreciate: this is calculated by subtracting from the total asset value, the salvage value. So, the value we are going to depreciate is $ 79,600. With the straight-line method, depreciation is the same amount all years.

The depreciation each year by the straight-line method is:

Depreciation (yearly)= value to depreciate/ useful life years

Depreciation( yearly)= $79,600/8

Depreciation (yearly)= $9,950

Then, in October 1, 2018 the depreciation expense will be $9,950

Because we need the depreciation expense for december 31, 2017, we need to know the depreciation expense each month. To do so, we divide the yearly depreciation into 12 (12 months):

Depreciation (monthly)= $9,950/12

Depreciation (monthly)= $829.16

The depreciation expense for 2017 is: $ 829.16*2= $1,658.32

Rounded to 0 decimal places: $1,658

The depreciation expense for 2018 is: $9,950+(829.16*2)= 11,608.32

Rounded to 0 decimal places: $11,608