Question - Larkin Company purchased factory equipment with an invoice with an invoice price of $50,000. Other cost incurred were freight cost, $1,300; installation wiring and foundation, $2,200; material and labor costs in testing equipment, $700; oil lubricants and supplies to be used with equipment, $500; fire insurance policy covering equipment, $1,400. The equipment is estimated to gave a $5,000 salvage value at the end of its 8-year useful service life.
a. Compute the acquisition cost of the equipment. Clearly identify each element of cost.
b. If the straight-line method of depreciation was used, compute the annual rate applied to the depreciable cost.