Chance stables purchased a new baler as their annual equipment purchase.The baler was purchased for $10,000 down and a $50,000 note with an estimated life of 8 years.The baler will be worthless at the end of its life.The annual amount of depreciation on this equipment is:

Question

Quizplus · Accepted Answer

The annual depreciation expense is calculated by dividing the cost of the equipment minus the salvage value by the estimated life of the equipment. In this case, the cost of the equipment is $50,000, the salvage value is $0, and the estimated life is 8 years. Therefore, the annual depreciation expense is $50,000 / 8 = $6,250.

Chance Stables Purchased a New Baler as Their Annual Equipment