Question

Equipment was purchased for $160000. Freight charges amounted to $3000 and there was a cost of $14000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $32000 salvage value at the end of its 5-year useful life.
Depreciation Expense each year using the straight-line method will be ______.

Answer 1

Answer:

$29,000

Explanation:

The computation of the depreciation expense using the straight line method is shown below:

= (Original cost - residual value) ÷ (useful life)

where,

Original cost is

= $160,000 + $3,000 + $14,000

= $177,000

And, the salvage value plus useful life is $32,000 and 5 years respectively

So, the depreciation expense is

= ($177,000 - $32,000) ÷ (5 years)

= ($145,000) ÷ (5 years)  

= $29,000

We simply applied the above formula