Equipment was purchased for $120,000. Freight charges amounted to $5,600 and there was a cost of $16,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $24,000 residual value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be

Question

Quizplus · Accepted Answer

The total cost of the equipment is $120,000 + $5,600 + $16,000 = $141,600. Subtract the residual value of $24,000 to get the depreciable amount: $141,600 - $24,000 = $117,600. Divide by the useful life of 5 years: $117,600 / 5 = $23,520 per year.

Equipment Was Purchased for $120,000