Equipment was purchased for $300,000.Freight charges amounted to $14,000 and there was a cost of $40,000 to build a foundation and install the equipment.It is estimated that the equipment will have a $60,000 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 $300,000 + $14,000 + $40,000 = $354,000. 
The depreciable cost of the equipment is the total cost minus the salvage value, which is $354,000 - $60,000 = $294,000. 
Using the straight-line method, the annual depreciation expense would be the depreciable cost divided by the useful life, which is $294,000/5 = $58,800. Therefore, the correct answer is B.

Equipment Was Purchased for $300,000