Answer:
$11,870
Explanation:
Given:
List price = $168,000
Discount = 10%
Shipping cost = $1,000
Sales tax = $6,500
Salvage value = $40,000
Useful life = 10 years
Now,
Purchasing price = List price - Discount
Purchasing price = $168,000 - [10% × $168,000]
Purchasing price = $168,000 - $16,800
Purchasing price = $151,200
Costs that are directly related to the purchase of asset are capitalized.
Thus,
Cost = Purchasing price + Shipping costs + Sales tax
Cost = $151,200 + $1,000 + $6,500
Cost = $158,700
Now,
Annual straight line depreciation = [tex]\frac{Cost-Residual Value}{Useful life}[/tex]
Annual straight line depreciation = [tex]\frac{158,700 - 40,000}{10}[/tex]
Annual straight line depreciation = [tex]\frac{118,700}{10}[/tex]
Annual straight line depreciation = $11,870
