Question

Equipment was purchased for $17,000. Freight charges amounted to $700 and there was a cost of $2,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $3,000 salvage value at the end of its 5-year useful life.
Depreciation expense each year using the straight-line method will be:



1. $3,940


2. $3,340


3. $2,800


4. $2,860

Answer 1

Answer:

Depreciation expense= $3,340

Explanation:

According to International Accounting standards (IAS) 16 property plan and equipment (PPE), the cost of an asset is the purchase cost plus other costs of bringing it to the intended working conditions.

Cost = 17,000 + 700 + 2,000= 16700

Depreciation expense per year = Cost - salvage value /Number of year                                

Depreciation = (16,700 - 3000)/5 =3340

Depreciation expense= $3,340