Dobler Company used factory equipment with an invoice price of 75,000. Other cos

Question

Dobler Company used factory equipment with an invoice price of 75,000. Other costs incurred were freight costs, $1,3000 installation wiring and foundation, $2,200; material and labor costs in testing equipment $700; oil lubricants and supplies to be used with equipment $500; fire insurance policy covering equipment, $1,500. The equipment is estimated to have a $5,000 salvage value at the end of its 8-year useful service life Instructions: a) Compute the acquisition cost of the equipment. Clearly identify each element of cost b) If the straight-line method of depreciation was used, the annual rate applied to the depreciable cost would be

Explanation / Answer

a Invoice cost 75000 Freight costs 1300 Installation wiring and foundation 2200 Material and labor costs in testing 700 Acquisition cost 79200 b Annual depreciation rate = 1/8 = 12.50%

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