Cullumber Company purchased a new machine on October 1, 2022, at a cost of $90,880. The company estimated that the machine has a salvage value of $8,640. The machine is expected to be used for 72,700 working hours during its 8-year life. Compute the depreciation expense under the straight-line method for 2022 and 2023, assuming a December 31 year-end.

Year 2022 = $2,570

Year 2023 = $10,280

Explanation:

Original cost = $90,880

Salvage value = $8,640

Number of useful years = 8

Using the straight line method ;

Annual depreciation = (Original cost - salvage value) ÷ Number of useful years

Annual depreciation = ($90,880 - $8640) ÷ 8

Annual depreciation = $82,240 ÷ 8

Annual depreciation = $10,280

2023 depreciation value = $10,280

However, the machine was purchased in October 1, 2022:

Therefore, 2022 depreciation = 3 months;

Monthly depreciation = $10,280 ÷ 12 = $856.6667

Therefore, 2022 depreciation :

$856.6667 × 3 = $2,569.999

=$2,570

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explanation: