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Dennis_Churaev [7]
3 years ago
6

MacKenzie Manufacturing purchased equipment for $160,000. In addition, shipping charges of $2,000 were incurred to obtain the eq

uipment. The company paid $12,500 to construct a foundation and install the equipment. The equipment is estimated to have a residual value of $15,000 at the end of its 5-year useful life. Using the straight-line method, what is the amount of depreciation expense each year?
(A) $34,900
(B) $34,500
(C) $29,900
(D) $31,900
Business
1 answer:
postnew [5]3 years ago
5 0

Answer:

The amount of depreciation expense each year is (D) $31,900

Explanation:

Total cost of the equipment = Purchased cost + Shipping charges + foundation and install fee = $160,000 + $2,000 + $12,500 = $174,500

MacKenzie Manufacturing use the straight-line method, Depreciation Expense each year is calculated by following formula:  

Annual Depreciation Expense = (Cost of the equipment − Residual Value )/Useful Life = ($174,500 - $15,000)/5 = $159,500/5 = $31,900

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Answer:

$30,000 under applied

Explanation:

For computing the over applied or under applied, first, we have to compute the predetermined overhead rate. The formula is shown below:

Predetermined overhead rate = (Total estimated manufacturing overhead) ÷ (estimated machine hours)

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Now we have to find the applied overhead which equal to

= Actual machine hours × predetermined overhead rate

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B. is much less than the costs to the whole American economy.

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