Question

On January 1, Year 1, Ballard company purchased a machine for $28,000. On January 1, Year 2, the company spent $7,000 to improve its quality. The machine had a $2,800 salvage value and a 6-year life, which are unchanged. Ballard uses the straight-line method. What is the book value of the machine on December 31, Year 4

Answer 1

Answer:

$23,520

Explanation:

The computation of book value of the machine is shown below:-

Machine cost                           $28,000

Less: Depreciation                    $4,200

($28,000 - $2,800) ÷ 6

Book Value at beginning

of Year 2                                    $23,800

Add: Improvements                   $7,000

Total                                             $54,600

Less: Accumulated

Depreciation for 3 years            $31,080

($54,600 - $2,800) × 3 ÷ 5 years

Book Value Dec 31, Year 4         $23,520