Question

Equipment was purchased for $60,000. Freight charges amounted to $2,800 and there was a cost of $8,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $12,000 salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will bea. $14,160.b. $11,760.c. $9,840.d. $9,600

Answer 1

Depreciation expense each year using the straight-line method will be:

b. $11,760

Step-by-step explanation:

Total cost of equipment = Purchasing price + Freight charges + Building a foundation and Installing fee = $60,000 + $2,800 + $8,000 = $70,800

The company uses straight-line method, the annual Depreciation expense will be calculated by using formula:

Annual Depreciation expense = ( Total Cost of asset− Salvage Value)/Useful life

Depreciation expense each year = ($70,800 - $12,000)/5 = $58,800/5 = $11,760