Question

Minor Company installs a machine in its factory at the beginning of the year at a cost of $135,000. The machine's useful life is estimated to be 5 years, or 300,000 units of product, with a $15,000 salvage value. During its first year, the machine produces 64,500 units of product. Determine the machines' first year depreciation under the straight-line method.
A) $27,000.
B) $29,025.
C) $25,800.
D) $23,779.
E) $24,000.

Answer 1

Answer:

The answer is E. $24,000

Explanation:

Straight line depreciation method equals

Cost of asset - salvage value / number of years.

Cost of asset is $135,000

Salvage value is $15,000

Number of years is 5 years

$135,000 - $15,000/5 years

$120,000/5 years

=$24,000

Straight line method of depreciation has equal amount all through the year.

The first year through it end life.

Therefore, machines' first year depreciation under the straight-line method is $24,000