Question

Mather Company purchased equipment on January 1, 2018 at a total invoice cost of $336,000; additional costs of $6,000 for freight and $30,000 for installation were incurred. The equipment has an estimated salvage value of $12,000 and an estimated useful life of five years. The amount of accumulated depreciation at December 31, 2019 if the straight-line method of depreciation is used is

Answer 1

$144,000

Step-by-step explanation:

The computation of accumulated depreciation is shown below:-

Total cost = Invoice cost + Freight + Installation

= $336,000 + $6,000 + $30,000

= $372,000

Depreciation as per SLM = (Total Cost - Salvage Value) ÷ Estimated useful life

= (372,000 - 12,000) ÷ 5

= $72,000

The amount of accumulated depreciation (after 2 years) = Depreciation as per SLM × Years

= 72,000 × 2

= $144,000

So, for computing the accumulated depreciation we simply applied the above formula.