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Financial & Managerial Accounting
Found in: Page 387
Financial & Managerial Accounting

Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

Short Answer

Question: On January 2, 2017, the Matthews Band acquires sound equipment for concert performances at a cost of $65,800. The band estimates it will use this equipment for four years, during which time it anticipates performing about 200 concerts. It estimates that after four years it can sell the equipment for $2,000. During year 2017, the band performs 45 concerts. Compute the year 2017 depreciation using the straight-line method.

Depreciation for the year 2017 is $15,950.

See the step by step solution

Step by Step Solution

Step 1: Straight-Line Method

Straight-line depreciation charges the same amount of expense to each period of the asset’s useful life. A two-step process is used. We first compute the depreciable cost of the asset, also called the cost to be depreciated. It is computed by subtracting the asset’s salvage value from its total cost. Second, depreciable cost is divided by the number of accounting periods in the asset’s useful life.

Step 2: Computing depreciation by straight-line method

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