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25 May, 12:08

Dabros Inc. is purchasing a new vapor depositor in order to make silicon chips. It will cost to buy the machine and $10,000 to have it delivered and installed. Building a clean room in the plant for the machine will cost an additional The machine is expected to have a working life of five years. If straight-line depreciation is used, what are the yearly depreciation expenses in this case

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  1. 25 May, 12:30
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    The answer is $1,402,000

    Explanation:

    Cost of an asset is the total cost of acquiring and asset plus the cost incurred in bringing the asset to a working condition e. g cost of transporting the asset to factory, cost of installation etc.

    Cost of the machine is:

    Cost of acquisition $4,000,000

    Cost of installation. $10,000

    Building a clean room. $3,000,000

    Total cost is. $7,010,000

    No salvage value

    Useful life is 5 years

    Cost of depreciation using the straight-line method is

    (cost of the asset - salvage value) : number of useful life

    $7,010,000 : 5

    = $1,402,000
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