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16 May, 09:36

Equipment was purchased for $60,000 on January 1, 2018. Related freight charges amounted to $2,800 and there was a cost of $8,000 for installing and testing the equipment. It is estimated that the equipment will have a $12,000 salvage value at the end of its 5-year useful life. How much is depreciation expense in 2018a.$9,600

b.$11,760

c.$14,160

d.$9,840

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  1. 16 May, 10:42
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    b) $11,760

    Explanation:

    Using the straight-line deprecition method, the annual depreciation mount for an asset is an equal amount which is equal to

    Annual depreciation = Cost of the assets - Salvage value / Expected useful life

    Cost of assets include the purchase price plus every other costs incurred to bring them for the intended use.

    Cost of equipment = 60,000 + 2,800 + 8,000 = 70,800

    Annual depreciation = (70,800 - 12,000) / 5

    = $11,760
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