Question

Kansas enterprises purchased equipment for 72,500 on January 1, 2024. The equipment is expected to have a five-year service life, with a residual value of 6,600 at the end of five years. What is the annual depreciation expense for the equipment?

1) 14,500
2) 13,900
3) 14,600
4) 13,500

Answer 1

The annual depreciation expense is found using the straight-line method, which in this case results in $13,180. This figure is not listed in the given choices, with $13,900 being the closest. It appears there may be an error in the provided options or the question itself.

Step-by-step explanation:

To calculate the annual depreciation expense for Kansas enterprises' equipment, the straight-line depreciation method will be used. This method spreads the cost of the equipment evenly over its useful life, after subtracting any residual value.

The cost of the equipment is $72,500 and the residual value at the end of five years is $6,600. Subtracting the residual value from the cost gives us the total amount to be depreciated:

$72,500 - $6,600 = $65,900

Dividing this amount by the service life of five years gives the annual depreciation expense:

$65,900 / 5 years = $13,180

However, since $13,180 is not an option provided in the question, it seems there may have been a miscalculation in the question or in the answer choices given. Among the choices provided, the closest is $13,900.