On August 3, Cinco Construction purchased special-purpose equipment at a cost of

Question

On August 3, Cinco Construction purchased special-purpose equipment at a cost of $1,000,000. The useful life of the equipment was estimated to be eight years, with an estimated residual value of $50,000.

a. Compute the depreciation expense to be recognized each calendar year for financial reporting purposes under the straight-line depreciation method (half-year convention).

Compute the depreciation expense to be recognized each calendar year for financial reporting purposes under the straight-line depreciation method (half-year convention). (Adjust year 9 depreciation, if necessary, so that the total depreciation expense equals depreciable value of the asset. Do not round intermediate calculations and round your final answers to the nearest whole number.)

Explanation / Answer

Annual Depreciation = (1,000,000 - 50,000)/8 = $118,750

Year Depreciation Amount 1 $59,375 2 $118,750 3 $118,750 4 $118,750 5 $118,750 6 $118,750 7 $118,750 8 $118,750 9 $59,375

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