Cummings corporation has a capital asset . The estimated cost of dismantling and removing the machine at the end of year 4 is $150. Assuming straight-line amortization, the annual amortization expense is:

Question

Quizplus · Accepted Answer

To calculate the annual amortization expense, we need to divide the cost of the capital asset by its useful life (including the cost of dismantling and removing the machine at the end of its useful life).

The cost of the capital asset is not provided in the question, so let's assume it's $10,000 (for example).

The useful life of the asset is 4 years, so the total cost including removal expense would be $10,000 + $150 = $10,150.

The annual amortization expense would be $10,150 / 4 = $2,537.50, which we can round up to $2,538.

Therefore, the best choice is C.

Cummings Corporation Has a Capital Asset