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Sunny_sXe [5.5K]
3 years ago
6

Julius Company bought a machine on January 1, 2016. The machine cost $144,000 and had an expected salvage value of $24,000. The

life of the machine was estimated to be 5 years. Using straight line depreciation, the book value of the machine at the beginning of the third year would be: ___________
Business
1 answer:
Alenkasestr [34]3 years ago
3 0

Answer:

$96,000

Explanation:

Data provided in the question:

Cost of the machine purchased on January 1, 2016 = $144,000

Expected salvage value = $24,000

Estimated life of the  machine = 5 years

Now,

Using the straight line method of depreciation

Annual depreciation = \frac{\textup{Cost - Salvage value}}{\textup{Useful life}}

or

Annual depreciation = \frac{\textup{144,000 - 24,000}}{\textup{5}}

or

Annual depreciation = $24,000

Now,

the accumulated depreciation till beginning of the third year

= Depreciation for the two years

= Annual depreciation × 2

= $24,000 × 2

= $48,000

Therefore,

The book value at the beginning of the third year

= Cost - Accumulated depreciation

= $144,000 - $48,000

= $96,000

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