Equipment was purchased for $60,000. Freight charges amounted to $2,800 and there was a cost of $8,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $12,000 salvage 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 $60,000 + $2,800 + $8,000 = $70,800. 
The depreciable cost of the equipment is the total cost minus the salvage value, which is $70,800 - $12,000 = $58,800. 
To calculate the annual depreciation expense using the straight-line method, we divide the depreciable cost by the useful life of the equipment, which is 5 years. 
Therefore, the annual depreciation expense is $58,800 ÷ 5 = $11,760.

Equipment Was Purchased for $60,000