Question

In: Accounting

On June 1, 2019, Turner Corporation purchased land, a building, and some equipment for $540,000. The...

On June 1, 2019, Turner Corporation purchased land, a building, and some
equipment for $540,000. The following information is available concerning
the property purchased:

                                 Current Market Value
Land .......................           142,500
Building ...................           262,200
Equipment ..................           165,300

Before the property could be used, Turner had to spend $26,000 to renovate
the building and $14,000 to put the equipment in working order.

Assume the equipment was assigned a $9,500 residual value, a 15-year life,
and was being depreciated using the straight-line depreciation method.

Calculate the book value of the equipment at December 31, 2025.

Solutions

Expert Solution

Calculation of the book value of the equipment at December 31, 2025
Year Beginning book value Addition Depreciation Ending Book Value
2019 $0 $179,300 $6,603 $172,697
2020 $172,697 $0 $11,320 $161,377
2021 $161,377 $0 $11,320 $150,057
2022 $150,057 $0 $11,320 $138,737
2023 $138,737 $0 $11,320 $127,417
2024 $127,417 $0 $11,320 $116,097
2025 $116,097 $0 $11,320 $104,777
The book value of the equipment at December 31, 2025 $104,777
Working
Depreciation on equipment per year using straight line method = (Depreciable value - residual value)/useful life
Depreciable value of equipment = Market value of equipment + cost to put it in working order = $165300 + $14000 = $179300
Depreciation on equipment per year using straight line method = ($179300 - $9500)/15 years = $11,320
Note : Depreciation for the year 2019 considered for 7 months.

ekkarill92 answered 1 year ago
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