Question

Cheetah Copy purchased a new copy machine. The new machine cost $140,000 including installation. The company estimates the equipment will have a residual value of $35,000. Cheetah Copy also estimates it will use the machine for four years or about 8,000 total hours. Actual use per year was as follows: Year Hours Used 1 3,000 2 2,000 3 2,000 4 2,000 Required: 1. Prepare a depreciation schedule for four years using the straight-line method.

Answer 1

Answer:

Depreciation Expense for year 1 = $26,250

Depreciation Expense for year 2 = $26,250

Depreciation Expense for year 3 = $26,250

Depreciation Expense for year 4 = $26,250

Explanation:

Cheetah Cop use the straight-line method depreciation, Depreciation Expense each year is calculated by following formula:  

Annual Depreciation Expense = (Cost of machine − Residual Value )/Useful Life = ($140,000 - $35,000)/4 = $105,000/4 = $26,250

Depreciation Expense for year 1 = $26,250

Depreciation Expense for year 2 = $26,250

Depreciation Expense for year 3 = $26,250

Depreciation Expense for year 4 = $26,250