Equipment was purchased for $78000 on January 1, 2018. Freight charges amounted to $4400 and there was a cost of $10400 for building a foundation and installing the equipment. It is estimated that the equipment will have a $15100 salvage value at the end of its 5-year useful life. What is the amount of accumulated depreciation at December 31, 2019, if the straight-line method of depreciation is used

The amount of accumulated depreciation at December 31, 2019 is $31,080

Explanation:

Straight line method, charges a fixed amount of depreciation over the use of an asset in the business.

Depreciation Expense Using Straight line method is calculated as:

Depreciation Expense = (Cost - Salvage Value) / Estimated useful life

First step is to determine the cost of the equipment.

Calculation of Cost of Equipment:

Purchase price $78,000

Freight charges $4,400

Installation costs $10,400

Total Costs $92,800

Then calculate the depreciation expense:

Depreciation Expense = ($92,800 - $15,100) / 5 years

= $15,540

Accumulated depreciation by December 31, 2019 is calculated as:

Accumulated depreciation = $15,540 * 2

= $31,080

Conclusion:

The amount of accumulated depreciation at December 31, 2019 is $31,080.