Equipment was purchased for $150,000.Freight charges amounted to $7,000 and there was a cost of $20,000 for building a foundation and installing the equipment.It is estimated that the equipment will have a $30,000 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

To calculate the depreciation expense each year, we need to subtract the salvage value from the total cost (purchased equipment + freight charges + building/installation cost) and divide it by the useful life in years.

Total cost = $150,000 + $7,000 + $20,000 = $177,000 
Depreciable amount = $177,000 - $30,000 = $147,000 
Useful life = 5 years

Depreciation expense per year = $147,000 ÷ 5 years = $29,400

Therefore, the best choice is B.

Equipment Was Purchased for $150,000