Question

Multiple Choice Question 91 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

$27,200

Step-by-step explanation:

Data provided in the question:

Purchasing cost = $147,000

Freight charges = $4,000

Foundation and installation charges = $19,000

Salvage value = $34,000

Useful life = 5 years

Now,

Total cost of the equipment

= Purchasing cost + Freight charges + Foundation and installation charges

= $147,000 + $4,000 + $19,000

= $170,000

using the straight line method of depreciation,

we have

Annual depreciation = [ Cost - Salvage value ] ÷ Useful life

= [ $170,000 - $34,000 ] ÷ 5

= $27,200