Question

Mather Company purchased equipment on January 1, 2012 at a total invoice cost of $224,000; additional costs of $4,000 for freight and $20,000 for installation were incurred. The equipment has an estimated salvage value of $8,000 and an estimated useful life of five years. The amount of accumulated depreciation at December 31, 2013 if the straight-line method of depreciation is used is:

Answer 1

$96,000

Step-by-step explanation:

Note that December 2013 is the end of the second year since the equipment was purchased, hence, the accumulated depreciation is 2-year accumulated depreciation which is shown thus:

Annual depreciation=(cost of equipment-salvage value)/useful life

The cost of equipment includes total invoice cost, freight, and installation costs

The cost of equipment=$224,000+$4,000+$20,000

The cost of equipment=$248,000

salvage value=$8,000

useful life= 5 years

Annual depreciation=($248,000-$8000)/5

Annual depreciation=$240,000/5

Annual depreciation=$48,000

Accumulated depreciation for 2 years=$48,000*2

Accumulated depreciation for 2 years=$96,000