An oil company is buying a semi-submersible oil rig for $20 million. Additionally, it will cost $1.5 million to move the oil rig to the oil-field and to prepare it for operations. If it is depreciated over five years using straight-line depreciation, what are the yearly depreciation expenses in this case?

Question

Quizplus · Accepted Answer

The total cost of the oil rig is $20 million + $1.5 million = $21.5 million.
Using straight-line depreciation, the yearly depreciation expense would be calculated as follows:

Total cost / Useful life = Yearly depreciation expense

$21.5 million / 5 = $4.3 million

Therefore, the answer is C) $4.0 million.

An Oil Company Is Buying a Semi-Submersible Oil Rig for $20