Question

Gotham Company purchased a new machine on October 1, 2022, at a cost of $90,000. The company estimated that the machine has a salvage value of $8,100. The machine is expected to be used for 70,000 working hours during its 10-year life. Compute the depreciation expense under the straight-line method for 2022 and 2023, assuming a December 31 year-end.

Answer 1

Answer:

8,190

Explanation:

We need to calculate depreciation expenses each based on working-hour driver. Depreciation expense per working hour is calculated as below:

Depreciation per working hour = (Original cost - Salvage value)/Total expected life in working hour

                                                   = (90,000 - 8,100)/70,000 = 1.17

Total working hour per year =70,000/Expected life in year = 70,000/10 = 7,000

So, Depreciation expense for 2020 and 2023 each is 1.17 x 7,000 = 8,190