Question

The management of Ballard MicroBrew is considering the purchase of an automated bottling machine for $47,000. The machine would replace an old piece of equipment that costs $13,000 per year to operate. The new machine would cost $6,000 per year to operate. The old machine currently in use could be sold now for a salvage value of $22,000. The new machine would have a useful life of 10 years with no salvage value.

Required:

1. What is the annual depreciation expense associated with the new bottling machine?

Answer 1

Answer:

$4,700

Explanation:

The computation of annual depreciation expense is shown below:-

Depreciation Expense of new Bottling Machine = (Cost of Asset - Salvage Value) ÷ Useful life of asset

= ($47,000 - 0) ÷ 10

= $47,000 ÷ 10

= $4,700

Therefore for computing the Depreciation Expense of new Bottling Machine we simply applied the above formula.