Question

Dabros Inc. is purchasing a new vapor depositor in order to make silicon chips. It will cost to buy the machine and $10,000 to have it delivered and installed. Building a clean room in the plant for the machine will cost an additional The machine is expected to have a working life of five years. If straight-line depreciation is used, what are the yearly depreciation expenses in this case

Answer 1

Answer:

The answer is $1,402,000

Explanation:

Cost of an asset is the total cost of acquiring and asset plus the cost incurred in bringing the asset to a working condition e.g cost of transporting the asset to factory, cost of installation etc.

Cost of the machine is:

Cost of acquisition $4,000,000

Cost of installation. $10,000

Building a clean room. $3,000,000

Total cost is. $7,010,000

No salvage value

Useful life is 5 years

Cost of depreciation using the straight-line method is

(cost of the asset - salvage value) ÷ number of useful life

$7,010,000 ÷ 5

= $1,402,000