On June 1,2014,Aaron Company Purchased Equipment at a Cost of $120,000

question 125

Essay

On June 1,2014,Aaron Company purchased equipment at a cost of $120,000 that has a depreciable cost of $90,000 and an estimated useful life of 3 years and 30,000 hours.
Using straight line depreciation,prepare the journal entry to record depreciation expense for (a)the first year, (b)the second year and (c)the last year.
$90,000/3 years = $30,000 per full year
$30,000/12 months = $2,500 per month
1st year - $2,500 x 7 months = $17,500
Last year - $2,500 x 5 months = $12,500

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Definitions:

Profit-Maximizing Output

The point of production where a company reaches its maximum possible profit.

Antimacassars

Protective coverings placed over the backs or arms of chairs and sofas to prevent soiling or wear, originally designed to protect furniture from the macassar oil used in men's hair grooming in the 19th century.

Labor Supply Curve

A graphic representation showing the relationship between the wage rate and the quantity of labor that workers are willing to supply.

Marginal Cost

The extra cost incurred by producing one more unit of a product or service; important in determining the optimal production level.