AA Riser owns machinery for moving and delivering plants to its customers. The recorded cost of the machinery is $38,000. It is estimated that the machinery will be able to move 120,000 plants over its life. The company depreciates the machinery using straight-line depreciation over a useful life of twelve years and an estimated residual value of $2,000. The amount that will be charged annually as depreciation will be:
A) $3,600
B) $3,000
C) $3,167
D) $3,800

Question

Quizplus · Accepted Answer

To calculate the annual depreciation expense under the straight-line method, we need to divide the depreciable cost by the useful life of the asset.

Depreciable cost = Cost of machinery - Residual value
Depreciable cost = $38,000 - $2,000
Depreciable cost = $36,000

Annual depreciation expense = Depreciable cost / Useful life
Annual depreciation expense = $36,000 / 12
Annual depreciation expense = $3,000

Therefore, the amount that will be charged annually as depreciation is $3,000, which corresponds to choice B.

AA Riser Owns Machinery for Moving and Delivering Plants to Its