Question

Machinery was purchased for $500000 on January 1, 2022. Freight charges amounted to $13000 and there was a cost of $32000 for building a foundation and installing the machinery. It is estimated that the machinery will have a $50000 salvage value at the end of its 4-year useful life. What is the amount of accumulated depreciation at December 31, 2023 if the straight-line method of depreciation is used?

Answer 1

Answer:

$247,500

Explanation:

For computing the accumulated depreciation at December 31, 2023 first we need to determine the depreciation expense using the straight line method which is shown below:

= (Original cost - residual value) ÷ (useful life)

where,

Original cost is

= $500,000 + $13,000 + $32,000

= $545,000

So, the depreciation expense is

= ($545,000 - $50,000) ÷ (4 years)

= ($495,000) ÷ (4 years)  

= $123,750

In this method, the depreciation is same for all the remaining useful life

So the accumulated depreciation is

= $123,750 × 2 years

= $247,500

The two years is from  January 1, 2022 to  December 31, 2023