Question

Multiple Choice Question 86Equipment was purchased for $310000. Freight charges amounted to $13900 and there was a cost of $40400 for building a foundation and installing the equipment. It is estimated that the equipment will have a $59900 salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be

Answer 1

$60,880

Step-by-step explanation:

Calculation for what the Depreciation expense each year will be using the straight-line method

First step is to calculate the Acquisition cost of equipment using this formula

Acquisition cost of equipment = Purchase price + Freight charges + Cost of foundation and installation

Let plug in the formula

Acquisition cost of equipment =$310000 + $13900 + $40400

Acquisition cost of equipment = $364,300

Second step is to calculate the Depreciable cost Using this formula

Let plug in the formula

Depreciable cost = Acquisition cost – Salvage value = $364,300- $59,900

Depreciable cost= $304,400

Last step is to calculate the Annual depreciation expense using this formula

Annual depreciation expense = Depreciable cost/Useful life

Let plug in the formula

Annual depreciation expense= $304,400/5 years

Annual depreciation expense = $60,880

Therefore what the Depreciation expense each year will be using the straight-line method is $60,880