### Depreciation Calculation Example: Oriole Company**Scenario:**Oriole Company purchased a new machine on October 1, 2025, at a cost of $68,880. The company estimated that the machine has a salvage value of $6,240. The machine is expected to be used for 48,880 working hours during its 6-year life.**Objective:**Compute the depreciation expense using the straight-line method for the years 2025 and 2026, assuming a December 31 year-end.**Explanation of Straight-Line Method:**The straight-line depreciation method spreads the cost of the asset evenly over its useful life. The formula is:\[ \text{Annual Depreciation Expense} = \frac{\text{Cost of Asset} - \text{Salvage Value}}{\text{Useful Life}} \]**Given Data:**- Cost of the Machine: $68,880- Salvage Value: $6,240- Useful Life: 6 years- Purchase Date: October 1, 2025**Calculation:**1. Calculate the total depreciation amount:\[ 68,880 - 6,240 = 62,640 \]2. Annual Depreciation Expense:\[ \frac{62,640}{6} = 10,440 \]For 2025:Since the machine was purchased on October 1, 2025, the depreciation for 2025 will be for 3 months (October, November, December):\[ \frac{3}{12} \times 10,440 = 2,610 \]For 2026:The full annual depreciation will apply:\[ 10,440 \]### Summary:| | 2025 | 2026 ||---------------------------|-----------|-----------|| Depreciation Expense under the Straight-Line Method | $2,610 | $10,440 |

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Description: ### Depreciation Calculation Example: Oriole Company**Scenario:**Oriole Company purchased a new machine on October 1, 2025, at a cost of $68,880. The company estimated that the machine has a salvage value of $6,240. The machine is expected to be use

Depreciation expense :— It is the allocation of depreciable cost over the estimated useful life of…

Business

Accounting

Oriole Company purchased a new machine on October 1, 2025, at a cost of $68,880. The company estimated that the machine has a salvage value of $6,240. The machine is expected to be used for 48,880 working hours during its 6-year life. Compute the depreciation expense under the straight-line method for 2025 and 2026, assuming a December 31 year-end. Depreciation expense under the straight-line method $ 2025 2026

Oriole Company purchased a new machine on October 1, 2025, at a cost of $68,880. The company estimated that the machine has a salvage value of $6,240. The machine is expected to be used for 48,880 working hours during its 6-year life. Compute the depreciation expense under the straight-line method for 2025 and 2026, assuming a December 31 year-end. Depreciation expense under the straight-line method $ 2025 2026

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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