George Zidek Corporation bought a machine on June 1, 2023, for $31,000, f.o.b. the place of manufacture. Freight to the point where it was set up was $200, and $500 was expended to install it. The machine's useful life was estimated at 10 years, with a salvage value of $2,500. On June 1,2024 , an essential part of the machine is replaced, at a cost of $1,980, with one designed to reduce the cost ofi operating the machine. The cost of the old part and related depreciation cannot be determined with any accuracy.
On June 1,2027 , the company buys a new machine of greater capacity for $35,000, delivered, trading in the old machine which has a fair value and trade-in allowance of $20,000. Preparing the old machine for removal from the plant cost $75, and expenditures to install the new one were $1,500. It is estimated that the new machine has a useful life of 10 years, with a salvage value of $4,000 at the end of that time. (The exchange has commercial substance.)
Instructions
Assuming that depreciation is to be computed on the straight-line basis, compute the annual depreciation on the new equipment that should be provided for the fiscal year beginning June 1, 2027. (Round to the nearest dollar.)