Abbott Company Opened for Business on January 1, Year 1

question 64

Essay

Abbott Company opened for business on January 1, Year 1. Also, on January 1, Year a, the company purchased office equipment that cost $20,700 cash. The equipment had a five-year useful life and a $6,600 expected salvage value.
Required:
Compute the depreciation expense using straight-line method for each of the five years.

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Definitions:

Unused Capacity

The available but not utilized production ability of a company which could potentially generate revenue if employed.

Unit Cost

The cost incurred to produce, store, or acquire one unit of a product, calculated by dividing the total cost by the number of units.

Differential Cost

The difference in cost between two alternative decisions or scenarios.

Sunk Cost

Costs that have already been incurred and cannot be recovered or altered and should not affect future business decisions.