Question

Required information

Use the following information for the Exercises below.

Skip to question

[The following information applies to the questions displayed below.]

On April 1, Cyclone's Co. purchases a trencher for $288,000. The machine is expected to last five years and have a salvage value of $44,000.

Exercise 8-11 Straight-line, partial-year depreciation LO C2

Compute depreciation expense at December 31 for the first and second year assuming the company uses the straight-line method.

	Choose Numerator:	/	Choose Denominator:	=	Annual Depreciation
		/		=	Annual depreciation
		/		=
Year	Annual Depreciation	x	Fraction of Year	=	Depreciation Expense
First year		x
Second year		x

  

Answer 1

Depreciation = (Cost - Salvage VAlue ) /Useful life of Asset

Cost = $288000 Salvage value = $44,000 Useful life of Asset = 5 years

Depreciation per year = ($288000 - $44000)/5

=$244000/5

=$48800

Depreciation per year = $48800

Depreciation in First year = $48800*9/12= $36,600

(AS the asset is used for only 9 months in the year 9/12 is considered)

Depreciation in year 2

In Straight line Method Depreciation remains same during the life of Asset

Therefore Depreciation in Year 2 = $48800