Question

DO NOT INCLUDE COMMAS OR DOLLAR SIGNS IN YOUR ANSWERS The Company acquired a machine on January 1, Year 1. The machine cost $325,000 and had an estimated residual value of $25,000 and an estimated useful life of 15 years. Answer the following based on straight-line depreciation. Depreciation expense for year 6 is: Accumulated depreciation at the end of year 6 is: Book value at the end of year 6 is:

Answer 1

Answer:

Depreciation expense for Year 6 is 20000

Accumulated depreciation at the end of year 6 is 120000

Book value at the end of year 6 is 205000

Explanation:

The straight line method of depreciation charges a constant depreciation expense per year through out the useful life of the asset. The formula for straight line depreciation per year is,

Depreciation expense per year = (Cost - Salvage Value) / Estimated useful life

So, the depreciation expense per year on this asset under straight line method is,

Depreciation expense per year = (325000 - 25000) / 15

Depreciation expense per year = $20000

• So, the depreciation expense for year 6 is $20000

The accumulated depreciation is calculated by adding the depreciation expenses for each year till date. The accumulated depreciation at the end of Year 6 is,

• Accumulated depreciation = 20000 * 6   =  $120000

The book value is calculated by deducting the accumulated depreciation from the cost of the asset. The book value at the end of year 6 is,

• Book value = 325000 - 120000   =   $205000