Answer:
Correct answer is A, $133,600
Explanation:
First, let’s compute the capitalizable amount of an asset on January 1, 2017.
Cost of machinery $340,000 plus the freight charges of $14,000 and the installation cost of $40,000 equals $394,000. Capitalizable cost includes all expenses incurred in bringing the asset in to its usable stage.
Second, let’s compute the depreciation expense using straight line method in December 31, 2017.
(Cost of asset - salvage value) / life of an asset
($394,000 - $60,000) / 5 years = $66,800
Finally, we can now compute the accumulated depreciation as of December 31, 2018 by multiplying annual depreciation computed previously (January 1, 2017 to December 31, 2017) by 2.
So, $66,800 x 2 years (2017 & 2018) = $133,600
