Question

In anticipation of Digby Corporation’s new product Digle, the company purchased new plant and equipment for $39,690,000. The plant and equipment is expected to be used for 15 years, and has a planned salvage value of $0. Assuming straight-line depreciation, how much will Digle expense in depreciation next year?
A. $1,323,000.
B. $1,984,500.
C. $3,969,000.
D. $2,646,000.

Answer 1

Answer:

The answer is D. $2,646,000

Explanation:

Straight-line depreciation equals

Cost of the asset minus salvage value/number of useful or expected years.

Cost of the asset(new plant and property) is $39,690,000

Salvage value is $0

Number of years is 15years

Therefore, Digle expense in depreciation next year will be:

$39,690,000 - 0/15years

= $2,646,000