Homework Answers
(a)
Initial entry will be:
DR Equipment $180,000
CR Cash $180,000
(Being equipment purchased for $180,000)
(b)
The annual addition will be the depreciation of the equipment, deducted from book value. If straight line method is assumed,
Annual depreciation ($) = (Cost - Salvage value) / Useful life = (180,000 - 15,000) / 10 = 165,000 / 10 = 16,500
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