Assume that MHS purchased two additional pieces of equipment on April 1st (the first day of its fiscal year), as follows: The laboratory equipment cost $300,000 and has an expected life of 5 years. The salvage value is 5 percent of cost. No equipment was traded in on this purchase. The radiology equipment cost $800,000 and has an expected life of 10 years. The salvage value is 10 percent of cost. No equipment was traded in on this purchase. Required For both pieces of equipment: a. Compute the annual straight-line depreciation for the laboratory equipment. b. Compute the annual straight-line depreciation for the radiology equipment.

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facundobuzzetti facundobuzzetti · Answer 1 · 2020-07-07T02:34:53+02:00

Answer:

Instructions are below.

Explanation:

Giving the following information:

Laboratory equipment:

Cost= $300,000

The expected life of 5 years.

Salvage value= 0.05*300,000= 15,000

Radiology equipmen:

Cost= $800,000

Expected life of 10 years

Salvage value= 0.10*800,000= 80,000

To calculate the depreciation expense under the straight-line method, we need to use the following formula:

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

A) Annual depreciation= (300,000 - 15,000)/5= $57,000

B) Annual depreciation= (800,000 - 80,000)/10= $72,000