Capitalizing delivery in equipment cost and treating maintenance as prepaid, depreciating straight-line

Steps:

• Equipment cost: $40,000 purchase +$5,000 delivery = $45,000.
• Annual depreciation: $45,000 / 8 years =$5,625 (ignoring residual for gross method calculation).
• Net book value of equipment: $45,000 -$5,625 = $39,375.
• Unamortized maintenance: $8,000 - ($8,000 / 8) = $7,000.
• Total carrying amount: $39,375 +$7,000 = $46,375.

Why B is correct:

• B reflects the total carrying amount of the equipment and related prepaid maintenance using the straight-line formula on capitalized costs, where delivery is added to PPE and maintenance is amortized separately per accounting standards for initial measurement.

Why the others are wrong:

• A: Excludes delivery from asset cost, understating the base for depreciation.
• C: Subtracts only maintenance amortization from total outlay, ignoring equipment depreciation.
• D: Total outlay without any depreciation or amortization deduction.

Final answer: B