Question

Cardinal Industries purchased a generator that cost $11,000. It has an estimated life of five years and a residual value of $1,000. It is estimated to be good for 5,000 hours. If depreciation is computed for the first full year using the straight-line method of depreciation, which information is needed for the calculation?

Answer 1

Answer:

The information needed are :

Cost of $11,000, life of an asset of 5 years and residual value of $1,000

Explanation:

In computing depreciation expense using straight line method, the information that we needed are the cost of an asset, the life of an asset and its salvage value after the life of an asset is over. The formula to compute is to deduct the salvage value of an asset from its cost and then divide it over the life of an asset. So based on the data given, the computation will be ($11,000 - $1,000) / 5 years.

Answer 2

Answer:

$11,000 cost, five-year life, and $1,000 salvage value

Explanation:

Under the straight-line method, the formula to compute the depreciation expense is shown below:

= (Purchase value of generator - residual value) ÷ (estimated useful life)

By considering these three items, we can easily find out the depreciation expense by using the above formula

All other information which is given is not relevant. Hence, ignored it as it is related to units-of production method.