Watmore Ltd. purchased, for cash, factory equipment with an invoice price of $80,000. Other costs incurred were freight costs, $1,600; installation, wiring and foundation, $13,500; material and labour costs in testing equipment, $500; oil lubricants and supplies to be used while operating the equipment, $750; fire insurance policy covering equipment, $1,400. The equipment is estimated to have a $10,000 residual value at the end of its 8-year useful service life.Instructions
a. Calculate the cost of the equipment.
b. Record the purchase of the equipment.
c. Calculate the annual depreciation expense, assuming the straight-line method of depreciation is used.

Question

Quizplus · Accepted Answer

The Answer of Watmore Ltd. purchased, for cash, factory equipment with an invoice price of $80,000. Other costs incurred were freight costs, $1,600; installation, wiring and foundation, $13,500; material and labour costs in testing equipment, $500; oil lubricants and supplies to be used while operating the equipment, $750; fire insurance policy covering equipment, $1,400. The equipment is estimated to have a $10,000 residual value at the end of its 8-year useful service life.Instructions
a. Calculate the cost of the equipment.
b. Record the purchase of the equipment.
c. Calculate the annual depreciation expense, assuming the straight-line method of depreciation is used.