Document1 Word erences Mailings Review View Tell me what you

Document1 -Word erences Mailings Review View ’Tell me what you want to do . .HI..x- ra._._ormal 1 No Spa... Heading 1 Heading 2 TitleSubtitle Paragraph Styles Since 2001, TSAY Steel has replaced all its major manufacturing equipment and now equipment recorded in the appropriate accounts. TSAY uses a calendar year as its fiscal year. A forge purchased January 1, 2000, for $100,000. Ordinary and necessary installation costs were $20,000, and the forge has an estimated 5-year life with a salvage value of $10,000. A grinding machine costing $45,000 purchased January 1, 2002. The machine has an estimated 5-year life with a salvage value of $5,000. A lathe purchased January 1, 2004 for $60,000. The lathe has an estimated 5-year life and a salvage value of $7,000. Using the straight-line depreciation method, TSAY\'s 2004 depreciation expense is: a. $45,000 b. $40,334 c. $40,600 d. $40,848 e. None of the above. ALENWARE

Solution

Solution:

Annual depreciation as per Straight line method = (Cost of Assets - Salvage Value)/Estimated years of life.

Annual depreciation on Forge = (120000-10000)/5 = $22,000

Annual depreciation on grinding machine = (45000-5000)/5 = $8,000

Annual depreciation on lathe = (60000-7000)/5 = $10,600

Annual depreciation for 2004 = $22,000 + $8,000 + $10,600 = $40,600