Question

A company purchased equipment for $90,000. Freight charges paid to acquire the equipment amounted to $4,200. There was a cost of $12,000 for constructing a foundation for the equipment and installing the equipment. It is estimated that the equipment will have a $18,000 salvage value at the end of its 5-year useful life. Depreciation expense each full year using the straight-line method will be Group of answer choices $17,400. $14,400. $21,240. $14,760. $17,640.

Answer 1

Answer:

Annual depreciation= $17,640

Explanation:

First, we need to calculate the total purchasing price which includes the costs of freight-in and installation.

Purchase price= 90,000 + 4,200 + 12,000

Purchase price= $106,200

To calculate the depreciation expense, we need to use the following formula:

Annual depreciation= (purchase price - salvage value)/estimated life (years)

Annual depreciation= (106,200 - 18,000) / 5

Annual depreciation= $17,640