Tomko Company purchased machinery with a list price of $32,000. They were given a 10% discount by the manufacturer. They paid $200 for shipping and sales tax of $1,500. Tomko estimates that the machinery will have a useful life of 10 years and a residual value of $10,000. If Tomko uses straight-line depreciation, annual depreciation will be
A) $2,050.
B) $2,036.
C) $1,880.
D) $3,050.

Question

Quizplus · Accepted Answer

The correct answer is A.The cost of the machinery is $32,000 - (10% x $32,000) = $28,800. The total cost of the machinery, including shipping and sales tax, is $28,800 + $200 + $1,500 = $30,500. The annual depreciation expense is ($30,500 - $10,000) / 10 = $2,050.

Tomko Company Purchased Machinery with a List Price of $32,000