Machinery was purchased for $340,000 on January 1, 2017. Freight charges amounted to $14,000 and there was a cost of $40,000 for building a foundation and installing the machinery. It is estimated that the machinery will have a $60,000 salvage value at the end of its 5-year useful life. What is the amount of accumulated depreciation at December 31, 2018, if the straight-line method of depreciation is used?
A)$133,600.
B)$66,800.
C)$57,200.
D)$114,400.

Question

Quizplus · Accepted Answer

The correct answer is A.The total cost of the machinery is $340,000 + $14,000 + $40,000 = $394,000. The salvage value is $60,000. The depreciable base is $394,000 - $60,000 = $334,000. The annual depreciation expense is $334,000 / 5 = $66,800. The accumulated depreciation at December 31, 2018, is $66,800 x 2 = $133,600.

Machinery Was Purchased for $340,000 on January 1, 2017