Equipment was purchased for $150000. Freight charges amounted to $7000 and there was a cost of $20000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $30000 salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be
A) $35400.
B) $29400.
C) $24600.
D) $24000.

Question

Quizplus · Accepted Answer

The total cost of the equipment is the purchase price plus freight charges plus installation costs, which equals $150,000 + $7,000 + $20,000 = $177,000. Using the straight-line depreciation method, the annual depreciation expense is calculated as (Cost - Salvage Value) / Useful Life. Therefore, ($177,000 - $30,000) / 5 = $147,000 / 5 = $29,400 per year.

Equipment Was Purchased for $150000