Cameron Industries is purchasing a new chemical vapor depositor in order to make silicon chips. It will cost $6 million to buy the machine and $10,000 to have it delivered and installed. Building a clean room in the plant for the machine will cost an additional $3 million. The machine is expected to have a working life of six years. If straight-line depreciation is used, what are the yearly depreciation expenses in this case?

Question

Quizplus · Accepted Answer

To calculate yearly depreciation expenses, we need to first calculate the total cost of the machine including delivery, installation, and building a clean room.

Total cost = $6 million + $10,000 + $3 million = $9.01 million

Now, we can use the straight-line depreciation method to calculate yearly depreciation expenses:

Yearly depreciation expenses = (Total cost - Salvage value) / Useful life

The salvage value of the machine is not given, so we will assume it is zero.

Yearly depreciation expenses = $9.01 million / 6 years = $1,501,667

Therefore, the correct answer is (C) $1,001,667.

Cameron Industries Is Purchasing a New Chemical Vapor Depositor in Order