Equipment was purchased for $85,000 on January 1, 2015. Freight charges amounted to $3,500 and there was a cost of $10,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $15,000 salvage value at the end of its 5-year useful life. What is the amount of accumulated depreciation at December 31, 2016, if the straight-line method of depreciation is used?

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Quizplus · Accepted Answer

The total cost of the equipment is $85,000 + $3,500 + $10,000 = $98,500. The depreciable amount is $98,500 - $15,000 = $83,500. Using the straight-line method over 5 years, annual depreciation is $83,500 / 5 = $16,700. For two years (2015 and 2016), accumulated depreciation is $16,700 * 2 = $33,400.

Equipment Was Purchased for $85,000 on January 1, 2015