Question

The cash price of this machine was $54,500. Related expenditures included: sales tax $2,050, shipping costs $100, insurance during shipping $110, installation and testing costs $80, and $100 of oil and lubricants to be used with the machinery during its first year of operations. Whispering Winds estimates that the useful life of the machine is 5 years with a $4,100 salvage value remaining at the end of that time period. Assume that the straight-line method of depreciation is used.

Answer 1

Under striaght line the depreciation wil be of 10,548 dollar per year.

Step-by-step explanation:

the accouting will enter the asset as the sum of all necessary cost to aquire it and leave it ready for use:

price 54,500

taxes 2,050

shipping 100

insurance 110

installation 80

total 56,840‬

depreciation per year:

(cost - salvage value ) / useful life

(56,840 - 4,100) / 5 = 10.548‬