On May 5, Year 1, Lloyd purchased a machine for $84,000. The estimated life of the machine was 10 years, with an estimated residual value of $10,000. The service life in terms of "output" is estimated at 8,000 hours of operation.
-Refer to the above data. Assume Lloyd uses straight-line depreciation with the half-year convention. Depreciation expense to be recognized in Year 1 (the year of purchase) is:

Question

Quizplus · Accepted Answer

Under the straight-line method with the half-year convention, depreciation for the first year is half of the full-year depreciation. The full-year depreciation is calculated as ($84,000 - $10,000) / 10 years = $7,400. Therefore, for Year 1, the depreciation expense is $7,400 / 2 = $3,700.

On May 5, Year 1, Lloyd Purchased a Machine for $84,000