In January,Fanning Corporation entered into a contract to acquire a new machine for its factory.The machine,which had a cash price of $400,000,was paid for as follows:

Prior to the machine's use,installation costs of $10,000 were incurred.The machine has an estimated useful life of ten years and an estimated salvage value of $10,000.What should Hunter record as depreciation expense for the first year under the straight-line method?
A)$38,100
B)$39,100
C)$40,000
D)$41,000

Question

In January,Fanning Corporation entered into a contract to acquire a new machine for its factory.The machine,which had a cash price of $400,000,was paid for as follows:

Prior to the machine's use,installation costs of $10,000 were incurred.The machine has an estimated useful life of ten years and an estimated salvage value of $10,000.What should Hunter record as depreciation expense for the first year under the straight-line method?
A)$38,100 
B)$39,100 
C)$40,000 
D)$41,000

Quizplus · Accepted Answer

The depreciable cost of the machine is calculated as follows:

Purchase price + Installation cost - Salvage value
= $400,000 + $10,000 - $10,000
= $400,000

Using the straight-line method, the annual depreciation expense will be:

Depreciation expense = (Depreciable cost / Useful life)
= ($400,000 / 10 years)
= $40,000

Therefore, the correct answer is C) $40,000.

In January,Fanning Corporation Entered into a Contract to Acquire a New