Depreciation Under Different Methods On January 1, 2010, Ron Shelley purchased a

Question

Depreciation Under Different Methods

On January 1, 2010, Ron Shelley purchased a new tractor to use on his farm. The tractor cost $100,000. Ron also had the dealer install a front-end loader on the tractor. The cost of the front-end loader was $7,000. The shipping charges were $600, and the cost to install the loader was $800. The estimated life of the tractor was eight years, and the estimated service-hour life of the tractor was 12,500 hours. Ron estimated that he could sell the tractor for $15,000 at the end of eight years or 12,500 hours. The tractor was used for 1,725 hours in 2013. A full year's depreciation was taken in 2010, the year of acquisition.

Compute depreciation expense for 2013 under each of the following methods:

Service-hours
(In your calculations, round per-hour depreciation rate to the nearest cent and your final answer to the nearest dollar.)

$  

Explanation / Answer

total cost cost of tractor 100,000 cost of front end loader 7,000 shipping charge 600 installation cost 800 total cost 108,400 Depreciation rate = (108400-15000)/12500 7.47 depreciation expense for (2013) = 7.47*1725 12886 answer

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