6 July, 02:43

# Equipment was purchased for \$152000. Freight charges amounted to \$5000 and there was a cost of \$14000 for building a foundation and installing the equipment. It is estimated that the equipment will have a \$38000 salvage value at the end of its 5-year useful life. Depreciation Expense each year using the straight-line method will be A. \$26600. B. \$34200. C. \$26000. D. \$22800.

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1. 6 July, 06:24
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The correct answer is A.

Explanation:

Giving the following information:

Equipment was purchased for \$152000. Freight charges amounted to \$5000 and there was a cost of \$14000 for building a foundation and installing the equipment. It is estimated that the equipment will have a \$38000 salvage value at the end of its 5-year useful life.

First, we need to calculate the total cost of the equipment.

Total cost = purchasing price + freight + cost required to put the asset to work

Total cost = 152,000 + 5,000 + 14,000 = \$171,000

Now, we can determine the depreciation cost:

Annual depreciation = (original cost - salvage value) / estimated life (years)

Annual depreciation = (171,000 - 38,000) / 5 = \$26,600