Machinery was purchased for $340,000.Freight charges amounted to $14,000 and there was a cost of $40,000 for building a foundation and installing the machinery.It is estimated that the machinery will have a $60,000 salvage value at the end of its 5-year useful life.Depreciation expense each year using the straight-line method will be
A)$78,800.
B)$66,800.
C)$57,200.
D)$56,000.

Question

Quizplus · Accepted Answer

The total cost of the machinery is $340,000 + $14,000 + $40,000 = $394,000. The depreciable amount is $394,000 - $60,000 (salvage value) = $334,000. Using the straight-line method over 5 years, the annual depreciation expense is $334,000 / 5 = $66,800.

Machinery Was Purchased for $340,000