Question

equipment was purchased for $150,000. freight charges amounted to $7,000 and there was a cost of $20,000 for building a foundation and installing the equipment. it is estimated that the equipment will have a $30,000 salvage value at the end of its 5-year useful life. depreciation expense each year using the straight-line method will be a. $35,400. b. $29,400. c. $24,600. d. $24,000.

Answer 1

The depreciation expense each year using the straight-line method will be $29,400. Therefore, the correct option is b. $29,400.

Step-by-step explanation:

The depreciation expense each year using the straight-line method can be calculated by subtracting the salvage value from the total cost and dividing it by the useful life of the equipment. In this case, the total cost of the equipment is $150,000 + $7,000 + $20,000 = $177,000. The salvage value is $30,000. So, the depreciable cost is $177,000 - $30,000 = $147,000. The useful life of the equipment is 5 years. Therefore, the depreciation expense each year will be $147,000 / 5 = $29,400.