On January 3, 2017, Coyote Corp.purchased machinery.The machinery has an estimated useful life of nine years and an estimated residual value of $45,000.Coyote uses straight-line depreciation for all their machinery, and recorded $77,000 depreciation expense for 2019.The acquisition cost of the machinery was
A)$738,000.
B)$710,000.
C)$693,000.
D)$685,000.

Question

Quizplus · Accepted Answer

To find the acquisition cost, we first calculate the annual depreciation expense. Since the machinery has a useful life of 9 years and a residual value of $45,000, the total depreciable amount is the acquisition cost minus the residual value. The annual depreciation expense is $77,000, so:  Annual Depreciation = (Acquisition Cost - Residual Value) / Useful Life  $77,000 = (Acquisition Cost - $45,000) / 9  Acquisition Cost - $45,000 = $77,000 * 9  Acquisition Cost = $693,000 + $45,000  Acquisition Cost = $738,000