Question

Equipment was purchased for $60,000 on January 1, 2018. Related freight charges amounted to $2,800 and there was a cost of $8,000 for installing and testing the equipment. It is estimated that the equipment will have a $12,000 salvage value at the end of its 5-year useful life. How much is depreciation expense in 2018a.$9,600

b.$11,760
c.$14,160
d.$9,840

Answer 1

b) $11,760

Step-by-step explanation:

Using the straight-line deprecition method, the annual depreciation mount for an asset is an equal amount which is equal to

Annual depreciation = Cost of the assets - Salvage value/ Expected useful life

Cost of assets include the purchase price plus every other costs incurred to bring them for the intended use.

Cost of equipment = 60,000 + 2,800 + 8,000 =70,800

Annual depreciation = (70,800 - 12,000)/5

= $11,760