Question

On January 1, 2016 Ballard Company spent $13,000 on an asset to improve its quality. The asset had been purchased on January 1, 2015 for $40,000. The asset had a $7,600 salvage value and a 6-year life. Ballard uses straight-line depreciation. What would be the book value of the asset on January 1, 2019

Answer 1

$24,800 would be the book value of the asset on January 1, 2019

Explanation:

Straight-line depreciation is a popular depreciation process in which the value of a fixed asset slowly declines over its useful life.

Straight line depreciation is the default method used to slowly reduce the amount of a fixed product over its useful life.

Divide the estimated useful life (in years) into 1 to arrive at the straight-line depreciation rate.

Multiply the depreciation rate by the asset cost (less salvage value).

For example, if a of $20,000 and a useful life of 5 years. The straight line depreciation for the machine would be calculated as follows: Cost of the asset: $100,000. Cost of the asset – Estimated salvage value: $100,000 – $20,000 = $80,000 total depreciable cost.