On January 1,2010,Boyd Corporation purchased a piece of equipment for $50,000,will pay $1,500 in property tax during the year,paid $500 to have it delivered,paid $1,000 to have it installed,paid $300 for 1 year of insurance,and paid $1,800 in sales tax.If the equipment has a ten year life and a $2,000 salvage value what will be the depreciation of the equipment for 2010 if straight-line depreciation is used.

Question

Quizplus · Accepted Answer

To calculate the annual depreciation of the equipment using straight-line depreciation method, we need to subtract the salvage value from the cost of the equipment and then divide it over the useful life of the equipment.

Cost of Equipment: $50,000 
Property Tax: $1,500 
Delivery: $500 
Installation: $1,000 
Insurance: $300 
Sales Tax: $1,800

Total Cost: $55,100

Annual Depreciation = (Cost - Salvage Value) / Useful Life
Annual Depreciation = ($55,100 - $2,000) / 10
Annual Depreciation = $5,310

Therefore, the depreciation of the equipment for 2010 is $5,130 (since the equipment was purchased on January 1, 2010, we divide the annual depreciation figure by 12 and multiply it by the number of months the equipment was in use in 2010, which is 12).

On January 1,2010,Boyd Corporation Purchased a Piece of Equipment for $50,000,will