Question

Barga Company purchases 20,000 of equipment on January 1. The equipment is expected to last five years and be worth2,000 at the end of that time. What is the annual depreciation expense for the equipment?

1) $4,000
2) $3,600
3) $3,000
4) $2,400

Answer 1

The annual depreciation expense for the equipment is $3,600.

Step-by-step explanation:

To calculate the annual depreciation expense for the equipment, we need to determine the depreciation per year. We can use the straight-line depreciation method, which divides the initial cost minus the salvage value by the useful life of the equipment. In this case, the initial cost is $20,000 and the salvage value is $2,000. The useful life is 5 years. So, the annual depreciation expense is:

(Initial Cost - Salvage Value) / Useful Life

($20,000 - $2,000) / 5 = $3,600

Therefore, the annual depreciation expense for the equipment is $3,600.