Question

Daily Enterprises is purchasing a $ 10.4 million machine. It will cost $ 55 comma 000 to transport 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

$2,091,000 per year

Step-by-step explanation:

Data provided in the question;

Purchasing cost of the machine = $10.4 million

Transportation cost = $55,000

Salvage value = 0

Depreciable life = 5 years

Now,

Total cost of the machine involved

= Purchasing cost of the machine + Transportation cost

= $10.4 million + $55,000

= $10,400,000 + $55,000

= $10,455,000

thus,

using the straight line method of depreciation

Annual depreciation =
`\frac{\textup{Total cost - Salvage value}}{\textup{Useful life}}`

Annual depreciation =
`\frac{\textup{$10,455,000 - 0}}{\textup{5}}`

or

Annual depreciation = $2,091,000

Hence,

Depreciation expenses associated with this​ machine is $2,091,000 per year