Equipment was purchased for $85000 on January 1 2016. Freight charges amounted to $3500 and there was a cost of $10000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $15000 salvage value at the end of its 5-year useful life. What is the amount of accumulated depreciation at December 31 2017 if the straight-line method of depreciation is used?

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Quizplus · Accepted Answer

The total cost of the equipment is $85000 + $3500 + $10000 = $98500. The depreciable amount is $98500 - $15000 = $83500. Using the straight-line method, annual depreciation is $83500 / 5 = $16700. For two years (2016 and 2017), accumulated depreciation is $16700 * 2 = $33400.

Equipment Was Purchased for $85000 on January 1 2016