Detailed Answer
Answer (C) is correct. Under the straight-line method, the annual depreciation expense for an asset equals the asset’s amount (cost – residual value) divided by the asset’s estimated useful life. The cost of the asset includes its price and the directly attributable costs of bringing it to working condition for intended use. Thus, the depreciation expense is $192,000 [($800,000 purchase price + $50,000 delivery cost + $70,000 installation cost + $40,000 trial-run cost) ÷ 5-year estimated service life]. Borrowing costs incurred after the asset is prepared for its intended use are expensed even if the allowed alternative treatment of such costs is followed, and the asset otherwise satisfies the criteria for capitalization of such expenses.