Question

On October 1, Organic Farming purchases wind turbines for $140,000. The wind turbines are expected to last six years, have a salvage
value of $20,000, 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.

Answer 1

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Answer:

1. $5000
2. $20,000

Step-by-step explanation:

1.

The annual depreciation is the predicted change in value each year. The change in value for 6 years is predicted to be ...

  $140,000 -20,000 = $120,000 . . . . loss of value in 6 years

3 months is 1/4 of one year, so the loss of value in that time period is ...

  $120,000/6 × 1/4 = $5000

The depreciation expense for the last 3 months of the first year is $5000.

__

2.

The depreciation expense for the second year is ...

  $120,000/6 = $20,000