Question

Super Saver Groceries purchased store equipment for $29,500. Super Saver estimates that at the end of its 10-year service life, the equipment will be worth $3,500. During the 10-year period, the company expects to use the equipment for a total of 13,000 hours. Super Saver used the equipment for 1,700 hours the first year. Required: Calculate depreciation expense of the equipment for the first year, using each of the following methods.

Answer 1

Answer:

Instructions are listed below.

Explanation:

Giving the following information:

Super Saver Groceries purchased store equipment for $29,500. Super Saver estimates that at the end of its 10-year service life, the equipment will be worth $3,500. During the 10-year period, the company expects to use the equipment for a total of 13,000 hours. Super Saver used the equipment for 1,700 hours in the first year.

1) Straight line:

Annual depreciation= (original cost - salvage value)/estimated life (years)

Annual depreciation= (29,500 - 3,500)/10= $2,600

2) Double declining balance:

Annual depreciation= 2*[(original cost - residual value)/estimated life (years)]

Annual depreciation= (26,000/10)*2= $5,200

3) Number of units:

Annual depreciation= [(original cost - salvage value)/useful life of production in units]*units produced

Annual depreciation= (26,000/13,000)*1,700= $3,400