Question - "Plant Assets" Please respond to the following:
Determine straight line depreciation for partial period
Vinxet Company purchased a new machine on October 1, 2017, at a cost of $90,000. The company estimated that the machine has a salvage value of $8,000. The machine is expected to be used for 70,000 working hours during its 8-year life.
Notice that Vinxet uses December 31 as its year end, and this purchase is made in October.
Instructions - Compute the depreciation expense under the straight-line method for 2017 and 2018, assuming a December 31 year-end.
Explain the consequences of recording a capital expenditure as an ordinary expense. Use numbers to illustrate your understanding.