Equipment was purchased for $152000. Freight charges amounted to $5000 and there was a cost of $14000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $38000 salvage value at the end of its 5-year useful life. Depreciation Expense each year using the straight-line method will be A. $26600. B. $34200. C. $26000. D. $22800.

The correct answer is A.

Explanation:

Giving the following information:

Equipment was purchased for $152000. Freight charges amounted to $5000 and there was a cost of $14000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $38000 salvage value at the end of its 5-year useful life.

First, we need to calculate the total cost of the equipment.

Total cost = purchasing price + freight + cost required to put the asset to work

Total cost = 152,000 + 5,000 + 14,000 = $171,000

Now, we can determine the depreciation cost:

Annual depreciation = (original cost - salvage value) / estimated life (years)

Annual depreciation = (171,000 - 38,000) / 5 = $26,600