Dobler Company purchased factory equipment with an invoice price of $89,000. Oth

Question

Dobler Company purchased factory equipment with an invoice price of $89,000. Other costs incurred were freight cost, $1,300; installation wiring and foundation, $3,300; material and labor cost in testing equipment, $1,300; oil lubricants and supplies to be used with equipment, $500; fire insurance policy covering equipment, $3,200. The equipment is estimated to have a $8,900 salvage value at the end of its 11-year useful service life Dobler Company purchased factory equipment with an invoice price of $89,000. Other costs incurred were freight cost, $1,300; installation wiring and foundation, $3,300; material and labor cost in testing equipment, $1,300; oil lubricants and supplies to be used with equipment, $500; fire insurance policy covering equipment, $3,200. The equipment is estimated to have a $8,900 salvage value at the end of its 11-year useful service life Dobler Company purchased factory equipment with an invoice price of $89,000. Other costs incurred were freight cost, $1,300; installation wiring and foundation, $3,300; material and labor cost in testing equipment, $1,300; oil lubricants and supplies to be used with equipment, $500; fire insurance policy covering equipment, $3,200. The equipment is estimated to have a $8,900 salvage value at the end of its 11-year useful service life

Explanation / Answer

Costs pertaining to equipment to be capitalized : Invoice price + freight cost + installation wiring and foundation + materials and labor cost in testing equipment = $ ( 89,000 + 1,300 + 3,300 + 1,300) = $ 94,900

Depreciable amount of the equipment = Cost - Salvage value = $ 94,900 - $ 8,900 = $ 86,000

Annual depreciation expense ( Staight-line method) = Depreciable amount / Estimated useful life = $ 86,000 / 11 = $ 7,818.18

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