Question

First, we will start with annual depreciation. We will always use straight-line depreciation in this course Consider a firm that purchased an equipment for $165,891 and incurred an additional $42,172 for shipping and installation. What will be the annual depreciation expense if the equipment is expected to last 13 years and have a salvage value of $4,018 (using straight-line depreciation)

Answer 1

Answer:

Annual Depreciation expense = $15695.7692  rounded off to  $15695.77

Explanation:

We first need to calculate the cost of the equipment. The cost at which an equipment or asset should be recorded should include all the costs incurred to bring the asset into the place and condition necessary for its use as intended by the management. Thus the cost of the equipment will be,

Cost = 165891 + 42172

Cost = $208063

Now we can calculate the depreciation expense per year based on the straight line depreciation method using the following formula,

Annual Depreciation expense = (Cost - Salvage Value) / Estimated useful life

Annual Depreciation expense = (208063 - 4018) / 13

Annual Depreciation expense = $15695.7692  rounded off to  $15695.77