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On January 1, 2018, Busy Beaver, Inc., signed a $315,000, 5-year note payable to buy a new industrial veneer cutter. Busy Beaver plans to use the machine for 10 years and then sell it for its scrap value of $5,000. Using straight-line depreciation, Depreciation Expense for the year ended December 31, 2018 equals ______.
a. $284,000.
b. $31,500.
c. $283,500.
d. $31,000.

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facundobuzzetti

Answer:

Annual depreciation= $31,000

Explanation:

Giving the following information:

Purchase price= $315,000

Useful life= 10 years

Salvage value= $5,000

To calculate the depreciation expense, we need to use the following formula:

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

Annual depreciation= (315,000 - 5,000) / 10

Annual depreciation= 310,000/10

Annual depreciation= $31,000

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