Question

A machine was purchased for $180,000 and it was estimated to have an $12,000 salvage value at the end of its useful life. Monthly depreciation expense of $1,400 was recorded using the straight-line method. The annual depreciation rate isa. 12%.b. 2%.c. 8%.d. 10%.

Answer 1

Answer: The answer is d 10%

Step-by-step explanation:

Rate = Annual depreciation /Cost of Asset

Cost = $180,000 Salvage value at the end of the useful life of the machine =$12,000

Since we are given monthly depreciation, we multiply it by 12 to get the annual depreciation

=1,400*12=16,800

We subtract the salvage value from cost to know the real cost of the machine at the end of the useful life

180,000-12,000=168,000

Therefore to calculate rate

= Annual depreciation /Cost of the machine

= 16,800/168,000

= 0.1 *100

=10%

Therefore the annual depreciation rate is 10%