Question

On January 1, the Matthews Band pays $68,400 for sound equipment. The band estimates it will use this equipment for four years and perform 200 concerts. It estimates that after four years it can sell the equipment for $1,000. During the first year, the band performs 45 concerts. Compute the first-year depreciation using the units-of-production method.

Answer 1

Answer:

$16,850

Explanation:

The computation of first-year depreciation is shown below:-

Cost minus salvage = $68,400 - $1,000

= $67,400

First-year depreciation = Cost minus salvage ÷ Annual depreciation expense

= $67,400 ÷ 4

= $16,850

Therefore for computing the first year depreciation we simply annual depreciation expense by cost minus salvage.