Question

On January​ 2, 2017, Kellogg Corporation acquired equipment for​$800,000. The estimated life of the equipment is 5 years or​ 80,000 hours. The estimated residual value is​ $10,000. What is the book value of the asset on December​ 31, 2018, if Kellogg Corporation uses the straight−line method of​ depreciation? (Round any intermediary calculations to two decimal places and your final answer to the nearest​ dollar.)
A. $790,000

B. $800,000

C. $484,000

D ​$642,000

Answer 1

Answer:

Book value of the asset = $484,000

Explanation:

Given:

Equipment cost = $800,000

Residual value = $10,000

Computation:

Depreciation = (Equipment cost - Residual value) /  Life

Depreciation = ($800,000 - $ 10,000) / 5

Depreciation = $ 158,000 per year

Depreciation for 2 year =$ 158,000 x 2

Depreciation for 2 year = $316,000

Book value of the asset = Equipment cost - Depreciation for 2 year

Book value of the asset = $800,000 - $316,000

Book value of the asset = $484,000