1. To compute depreciation expense for the last three months of the first year, we first need to determine the depreciation per month.
The yearly depreciation can be calculated by subtracting the salvage value from the cost and dividing it by the useful life:
Depreciation = (Cost - Salvage value) / Useful life
Depreciation = ($150,000 - $21,000) / 5
Depreciation = $129,000 / 5
Depreciation = $25,800 per year
To find the monthly depreciation, divide the yearly depreciation by 12:
Monthly depreciation = $25,800 / 12
Monthly depreciation = $2,150
Since we are calculating depreciation for the last three months of the first year, multiply the monthly depreciation by three:
Depreciation expense for the last three months of the first year = $2,150 * 3
Depreciation expense for the last three months of the first year = $6,450
2. The depreciation expense for the second year is the same as the yearly depreciation:
Depreciation expense for the second year = $25,800
On October 1, Organic Farming purchases wind turbines for $150,000. The wind turbines are expected to last five years, have a salvage value of $21,000, and be depreciated using the straight-line method. 1. Compute depreciation expense for the last three months of the first year. 2. Compute depreciation expense for the second year.
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