Xanadu Company purchased a new machine on October 1, 2014, at a cost of $96,000. The company

Question:

Xanadu Company purchased a new machine on October 1, 2014, at a cost of $96,000. The company estimated that the machine will have a salvage value of $12,000. The machine is expected to be used for 10,000 working hours during its 5-year life.

Instructions

Compute the depreciation expense under the following methods for the year indicated.

(a) Straight-line for 2014.

(b) Units-of-activity for 2014, assuming machine usage was 1,700 hours.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...