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1 October, 15:53

Equipment was purchased for $150,000. Freight charges amounted to $7,000 and there was a cost of $20,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $30,000 salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be:

A) $24000.

B) $35400.

C) $29400.

D) $24600.

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  1. 1 October, 18:03
    0
    The correct answer is C

    Explanation:

    Computing the depreciation expense using the method of straight line as:

    Depreciation expense = Cost of assets - Salvage Value / Number of useful years

    where

    Cost of asset = Purchased cost + Freight charges + Installing cost

    = $150,000 + $7,000 + $20,000

    = $177,000

    Salvage value is $30,000

    Number of year useful life of asset is 5 years

    So, putting the values above as:

    Depreciation expense = $177,000 - $30,000 / 5

    Depreciation expense = $147,000 / 5

    Depreciation expense = $29,400

    Therefore, each year depreciation expense would be $29,400
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