On April 1, 2016, Cyclone's Backhoe Co. purchases a trencher for $294,000. The machine is expected to last five years and have a salvage value of $47,000. Compute depreciation expense for both years ending December 2016 and 2017 assuming the company uses the straight-line method.

2016:

Annual depreciation= $37,050

2017:

Annual depreciation= $49,400

Explanation:

Giving the following information:

April 1st= $294,000.

Useful life= 5 years

Salvage value= $47,000.

First, we need to calculate the annual depreciation expense. Under the straight-line method, depreciation remains constant during the life of the asset. We will use the following formula:

Annual depreciation= (original cost - salvage value)/estimated life (years)

Annual depreciation= (294,000 - 47,000)/5= $49,400

2016:

Annual depreciation= (49,400/12)*9= $37,050

2017:

Annual depreciation= $49,400

answer; operating revenues;

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