Stine Company purchased machinery with a list price of $64,000. They were given a 10% discount by the manufacturer. They paid $400 for shipping and sales tax of $3,000. Stine estimates that the machinery will have a useful life of 10 years and a residual value of $20,000. If Stine uses straight-line depreciation, annual depreciation will be
A) $4,100.
B) $4,072.
C) $6,100.
D) $3,760.

Question

Quizplus · Accepted Answer

The correct answer is A.The cost of the machinery is $64,000 - (10% x $64,000) = $57,600. The total cost of the machinery, including shipping and sales tax, is $57,600 + $400 + $3,000 = $61,000. The annual depreciation expense is ($61,000 - $20,000) / 10 = $4,100.

Stine Company Purchased Machinery with a List Price of $64,000