Question

On January 1, 2019, Woodstock, Inc. purchased a machine costing $40,000. Woodstock also paid $1,000 for transportation and installation.

The expected useful life of the machine is 6 years and the residual value is $5,000.

How much is the annual depreciation expense, assuming use of the straight-line depreciation method?

a. $6,100

b.$5,950.

c. $5,750

d. $6,000

Answer 1

annual depreciation expense = $6000

so correct option is d. $6,000

Step-by-step explanation:

given data

machine costing = $40,000

transportation and installation = $1,000

useful life = 6 years

residual value = $5,000

to find out

How much is the annual depreciation expense

solution

we get here first Cost of machine that is

Cost = $40,000 + $1000

cost = $41000

so depreciable base will be here

Depreciable base = cost - residual value

Depreciable base = 41000 - 5000

Depreciable base = $36,000

so annual depreciation expense is

annual depreciation expense =
`(36000)/(6)`

annual depreciation expense = $6000

so correct option is d. $6,000