Question

Equipment was purchased for $147000. Freight charges amounted to $4000 and there was a cost of $19000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $34000 salvage value at the end of its 5-year useful life. Depreciation Expense each year using the straight-line method will be ____.

Answer 1

Answer:

Depreciation Expenses is $27,200

Explanation:

to calculate the total cost of the equipment according to IAS 16 will be:

Purchases                                    $147,000

Freight and charges                     $4000

Building foundation                       $19,000

                                                       --------------

Total Cost                                        $170,000

                                                      -----------------

Depreciation using straight line method =     Cost  - Salvage value/ no. of years

        $170,000  -  $34,000/ 5years

 

            $136,000/ 5  = $27,200

Income Statement

Depreciation expense          $27,200