Question

Tomko company purchased machinery with a list price of $96,000. they were given a 10% discount by the manufacturer. they paid $600 for shipping and sales tax of $4,500. tomko estimates that the machinery will have a useful life of 10 years and a residual value of $30,000. if tomko uses straight-line depreciation, annual depreciation will be

Answer 1

Start by calculating the price of the machinery. It is $96,000 - $9,600 + $600 + $4,500 = $91,500. To figure the annual depreciation, we subtract the residual value of $30,000 to yield a cost of $61,500. Since the machinery has a useful life of 10 years, annual depreciation using the straight-line method is $61,500/10, or $6,150.