Cafe X purchased a new espresso maker for $3,000 at the beginning of the month. If equipment is depreciated over 5 years, what is the first month’s expense?
Question
Cafe X purchased a new espresso maker for $3,000 at the beginning of the month. If equipment is depreciated over 5 years, what is the first month’s expense?
Solution
To calculate the first month's expense for the espresso maker, we first need to determine the total depreciation over 5 years.
Step 1: Calculate total depreciation The total depreciation is the initial cost of the equipment, which is $3,000.
Step 2: Calculate annual depreciation The equipment is depreciated over 5 years, so we divide the total depreciation by 5. 600. This is the annual depreciation.
Step 3: Calculate monthly depreciation To find the monthly depreciation, we divide the annual depreciation by 12 (since there are 12 months in a year). 50.
So, the first month's expense for the espresso maker is $50.
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