Question

Daily Enterprises is purchasing a $10 million machine. It will cost $50,000 to trans- port and install the machine. The machine has a depreciable life of five years and will have no salvage value. If Daily uses straight-line depreciation, what are the depreciation expenses associated with this machine?

Answer 1

$2,010,000

Step-by-step explanation:

The computation of the depreciation expense for is shown below under Straight-line method:

= (Original cost - residual value) ÷ (useful life)

where,

Original cost = Purchase cost + installation cost

= $10,000,000 + $50,000

= $10,050,000

And, useful life is five years

= ($10,050,000- $0) ÷ (5 years)

= ($10,050,000) ÷ (4 years)

= $2,010,000

In this method, the depreciation is same for all the remaining useful life