B is corrent. The machine cost is $51,700 ($50,000 cost plus shipping cost of $500 and installation cost of $1,200). The depreciation base is $48,700 (cost of $51,700 less salvage value of $3,000) resulting in an annual depreciation cost of $4,870 ($48,700 ÷ 10 yr.). Additions increase the service potential of an asset and thus should be charged to the asset. The pollution control additions of $3,600 made at the beginning of year 2 are to be amortized over the remaining 9 years with no salvage value, resulting in a $400 per year cost. Thus the depreciation for year 2 is $5,270 ($4,870 + $400).
A is incorrect. The machine cost is $51,700 ($50,000 cost plus shipping cost of $500 and installation cost of $1,200). The depreciation base is $48,700 (cost of $51,700 less salvage value of $3,000) resulting in an annual depreciation cost of $4,870 ($48,700 ÷ 10 yr.). Additions increase the service potential of an asset and thus should be charged to the asset. The pollution control additions of $3,600 made at the beginning of year 2 are to be amortized over the remaining 9 years with no salvage value, resulting in a $400 per year cost. Thus the depreciation for year 2 is $5,270 ($4,870 + $400).
A is incorrect. The machine cost is $51,700 ($50,000 cost plus shipping cost of $500 and installation cost of $1,200). The depreciation base is $48,700 (cost of $51,700 less salvage value of $3,000) resulting in an annual depreciation cost of $4,870 ($48,700 ÷ 10 yr.). Additions increase the service potential of an asset and thus should be charged to the asset. The pollution control additions of $3,600 made at the beginning of year 2 are to be amortized over the remaining 9 years with no salvage value, resulting in a $400 per year cost. Thus the depreciation for year 2 is $5,270 ($4,870 + $400).
D is incorrect. The machine cost is $51,700 ($50,000 cost plus shipping cost of $500 and installation cost of $1,200). The depreciation base is $48,700 (cost of $51,700 less salvage value of $3,000) resulting in an annual depreciation cost of $4,870 ($48,700 ÷ 10 yr.). Additions increase the service potential of an asset and thus should be charged to the asset. The pollution control additions of $3,600 made at the beginning of year 2 are to be amortized over the remaining 9 years with no salvage value, resulting in a $400 per year cost. Thus the depreciation for year 2 is $5,270 ($4,870 + $400).
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