Cameron industries is purchasing a new chemical vapor depositor in order to make silicon chips. it will cost $ 4 million$4 million to buy the machine and $ 15 comma 000$15,000 to have it delivered and installed. building a clean room in the plant for the machine will cost an additional $ 3 million.$3 million. the machine is expected to have a working life of sevenseven years. if straight-line depreciation is used, what are the yearly depreciation expenses in this case

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Business

Alexzander Ellis

31 January, 08:21

Cameron industries is purchasing a new chemical vapor depositor in order to make silicon chips. it will cost $ 4 million$4 million to buy the machine and $ 15 comma 000$15,000 to have it delivered and installed. building a clean room in the plant for the machine will cost an additional $ 3 million.$3 million. the machine is expected to have a working life of sevenseven years. if straight-line depreciation is used, what are the yearly depreciation expenses in this case

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Kathleen Rich · Answer 1

On basis of straight-line depreciation method,

Yearly depreciation expense = [Cost of investment - Salvage value] / life

In the current case, salvage vale is assumed to be $0 and the life is 7 years.

Total investment = $4 m + $ (15,000/1,000,000) m + $3 m = $7.015 m

Therefore,

Yearly depreciation expense = 7.015/7 ≈ $1.002 m