Trinitron, Inc. purchased a new molding machine for $85,000. The company paid $8

Question

Trinitron, Inc. purchased a new molding machine for $85,000. The company paid $8,000 for shipping and another $7,000 to get the machine integrated with the company's existing assets. Trinitron must maintain a supply of special lubricating oil just in case the machine breaks down. The company purchased a supply of oil for $4,000. The machine is to be depreciated on a straight-line basis over its expected useful life of 8 years. What will depreciation expense be during the first year?

$13,000

$12,500

$11,500

$11,625

$13,000

$12,500

$11,500

$11,625

Explanation / Answer

Machine Cost = Purchase Cost + Shipping cost + Installation cost

Machine Cost = 85000+8000+7000

Machine Cost = $ 100000

Depreciation expense be during the first year = Machine Cost/Useful life

Depreciation expense be during the first year = 100000/8

Depreciation expense be during the first year = 12500

Answer

B) $ 12500

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