Equipment was purchased for $75,000. 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. Depreciation expense each year using the straight-line method will be

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Quizplus · Accepted Answer

The total cost of the equipment is $75,000 + $3,500 + $10,000 = $88,500. The depreciable amount is $88,500 - $15,000 (salvage value) = $73,500. Using the straight-line method over 5 years, the annual depreciation expense is $73,500 / 5 = $14,700.

Equipment Was Purchased for $75,000