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Equipment was purchased for $60,000. Freight charges amounted to $2,800 and there was a cost of $8,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $12,000 salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be a. $9,600 b. $11,760 c. $14,160 d. $9,840

Respuesta :

Answer:

b. $11,760

Explanation:

The computation of the depreciation expense is shown below:

= (Original cost - residual value) ÷ (useful life)

= ($70,800 - $12,000) ÷ (5 years)

= ($58,800) ÷ (5 years)  

= $11,760

In this method, the depreciation is same for all the remaining useful life

The Purchase cost is computed below:

= $60,000 + $2,800 + $8,000

= $70,800