Question

The management of Ballard MicroBrew is considering the purchase of an automated bottling machine for $74,000. The machine would replace an old piece of equipment that costs $19,000 per year to operate. The new machine would cost $9,000 per year to operate. The old machine currently in use could be sold now for a salvage value of $31,000. The new machine would have a useful life of 10 years with no salvage value. Required: 1. What is the annual depreciation expense associated with the new bottling machine

Answer 1

$7,400 per year

Step-by-step explanation:

Data provided for computing the annual depreciation expense is here below:-

Automated bottling machine = $74,000

Useful life = 10 years

The calculation of annual depreciation expense is given below:-

Annual depreciation expense = Automated bottling machine ÷ Useful life

= $74,000 ÷ 10

= $7,400 per year

Therefore for computing the annual depreciation expense we simply divide the automated bottling machine by useful life.