Blossom Company purchased machinery with a list price of $80000. They were given a 5% discount by the manufacturer. They paid $400 for shipping and sales tax of $4000. Blossom estimates that the machinery will have a useful life of 10 years and a residual value of $25000. If Blossom uses straight-line depreciation, annual depreciation will be

$5,540

Explanation:

Calculation of Blossom annual depreciation using the straight-line depreciation

Annual depreciation=[List price-discount] + shipping + sales tax - residual value) ÷ 10 years

Let plug in the above formula

Annual depreciation =[($80000-$4,000)+($400+$4,000-$25,000)÷10 years ]

Annual depreciation =$76,000+$400+$4,000-$25,000÷10 years

=$55,400÷10 years

Annual depreciation =$5,540

Calculation for list price discount

5%×80,000

=$4,000

Therefore Blossom annual depreciation using the straight-line depreciation would be $5,540

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