Question

Equipment was purchased for $147000. Freight charges amounted to $4000 and there was a cost of $19000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $34000 salvage value at the end of its 5-year useful life. Depreciation Expense each year using the straight-line method will be ____.

Answer 1

Depreciation Expenses is $27,200

Step-by-step explanation:

to calculate the total cost of the equipment according to IAS 16 will be:

Purchases $147,000

Freight and charges $4000

Building foundation $19,000

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Total Cost $170,000

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Depreciation using straight line method = Cost - Salvage value/ no. of years

$170,000 - $34,000/ 5years

$136,000/ 5 = $27,200

Income Statement

Depreciation expense $27,200