During 2019, Thomas Manufacturing Company sells machines which a 5-year warranty for defects. Estimates indicate that total repair costs will average 4% of the total selling price. The estimated warranty liability was $42,000 at the beginning of 2019, and $47,000 at the end of 2019. Also, $11,000 in claims was actually incurred during the year to honor their warranty. What was the sales revenue for the year 2019

A. $12,000 B. $34,000 C. $125,000 D. $137,000

The depreciable basis of the equipment is $137,000,option D

Explanation:

The depreciable basis of the equipment is the initial cost of the equipment to be recognized as asset ,which consists of the original purchase price of $125,000,the shipping cost of $7,000,set-up and testing cost of $5,000.

The annual labor cost of running the equipment is not part of the initial cost as it is an annual expense to be recognized directly in income statement as payroll cost.

Depreciable basis=$125,000+$7,000+$5,000=$137,000