Equipment was purchased for $51,000. Freight charges amounted to $2,100 and there was a cost of $6,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $9,000 salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be:
A) $11,820.
B) $10,020.
C) $8,580.
D) $8,400.

Question

Quizplus · Accepted Answer

The total cost of the equipment including freight charges and installation cost is $59,100 ($51,000+$2,100+$6,000). 
The depreciable cost of the equipment is $50,100 ($59,100-$9,000 salvage value). 
Using the straight-line method, the annual depreciation expense will be the depreciable cost divided by the useful life of the equipment: $10,020 ($50,100 divided by 5 years). Therefore, the best choice is B.

Equipment Was Purchased for $51,000