Question

A purchase of equipment for $18,000 also involved freight charges of $500 and installation costs of $2,500. The estimated salvage value and useful life are $2,000 and 4 years, respectively. Under the straight-line method, annual depreciation expense will be
A. $4,750
B. $4,500
C. $4,125
D. $4,625

Answer 1

Answer:

$4,750

Explanation:

The computation of the depreciation expense is shown below:

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

where,

Original cost = $18,000 + $500 + $2,500 = $21,000

And, the other items would remain same

Now put these values to the above formula

So, the value would be equal to

= ($21,000 - $2,000) ÷ (4 years)

= ($19,000) ÷ (4 years)  

= $4,750