Question

In: Accounting

A machine was purchased on January 1 for $100,000. The machine has an estimated useful life...

A machine was purchased on January 1 for $100,000. The machine has an estimated useful life of 4 years with a salvage value of $10,000. Under the straight-line method, accumulated depreciation at the end of year 2 is:

Solutions

Expert Solution

Answer)

Calculation of Accumulated Depreciation - Straight Line Method

Under straight line method, cost of acquisition net of expected salvage value is charged as depreciation evenly over the estimated useful life of the asset. The formula for depreciation under Straight Line Method is:

Depreciation for each year = (Cost of Acquisition – Salvage value)/ Estimated useful life of the asset

Facts of the Question:

Cost of Acquisition = $ 1,00,000

Estimated useful life of the asset = 4 years

Salvage Value = $ 10,000

Depreciation for each year = ($ 1,00,000 - $ 10,000)/ 4

                                                = $ 22,500

Accumulated Depreciation

Particulars

Year 1

Year 2

Opening Balance

                 -

     22,500

Depreciation for the year

     22,500

     22,500

Closing Balance

     22,500

     45,000

Solution: Since an amount of $ 22,500 will be charged as depreciation each year, the value of accumulated depreciation at the end of year 2 will be $ 45,000.


Related Solutions

On January 1, 2018, a machine was purchased for $100,000. The machine has an estimated salvage...
On January 1, 2018, a machine was purchased for $100,000. The machine has an estimated salvage value of $6,400 and an estimated useful life of 5 years. The machine can operate for 104,000 hours before it needs to be replaced. The company closed its books on December 31 and operates the machine as follows: 2018, 20,800 hrs; 2019, 26,000 hrs; 2020, 15,600 hrs; 2021, 31,200 hrs; and 2022, 10,400 hrs. Compute the annual depreciation charges over the machine’s life assuming...
On January 1, 2017, company purchased a molding machine at 67.000 TL. The estimated useful life...
On January 1, 2017, company purchased a molding machine at 67.000 TL. The estimated useful life of the machine is 4 years and the estimated salvage value is 2.000 TL. At the beginning of the 3rd year a major renovation is maintained on the machine. The cost of the renovation is 34.000 TL. Because of the renovation estimated useful life extended to 6 years in total  and the salvage value increased to 2.500 TL. Assume the company uses double declining method  prepare...
Adelphi Company purchased a machine on January 1, 2017, for $100,000.  The machine was estimated to have...
Adelphi Company purchased a machine on January 1, 2017, for $100,000.  The machine was estimated to have a service life of ten years with an estimated residual value of $5,000.  Adelphi sold the machine on January 1, 2021 for $23,000. Adelphi uses the double declining method for depreciation. Using this information, how much is the gain or (loss) for the equipment sale entry made on January 1, 2021. Enter a loss as a negative number.
ABC purchased a machine on Jan 1, 2016 for $92788 with an estimated useful life of...
ABC purchased a machine on Jan 1, 2016 for $92788 with an estimated useful life of 12 years and no salvage value ABC uses the straight line depreciation method On December 31, 2018 technological changes suggest the machine may be impaired On December 31, 2018 the machine is expected to generate net cash flows of $6014 per year over its remaining life On December 31, 2018 the fair value of the machine is $45126.42 On Dec 31, 2018 the carrying...
Your Company purchased a machine with an estimated useful life of 8 years. The machine will...
Your Company purchased a machine with an estimated useful life of 8 years. The machine will generate cash inflows of $96,000 each year. The salvage value at the end of the project is $80,000. Your Company's discount rate is 6%. The net present value of the investment is ($7,500). What is the purchase price of the machine?
An asset was purchased on January 1, 2020 for $150,000. The estimated useful life is 5...
An asset was purchased on January 1, 2020 for $150,000. The estimated useful life is 5 years and 31,250 units. With the residual value being $25,000 prepare a schedule of depreciation for each of the Straight-line method, Double Declining Method and the Units of Production method. The units to be produced are as follows: Year 1 5,000 units, Year 2 4,000 units, Year 3 6,000 units, Year 4 10,000 units and Year 5 12,000 units. What is the depreciation expense...
A surface mount placement machine is being purchased for $1548000; it has an estimated useful life...
A surface mount placement machine is being purchased for $1548000; it has an estimated useful life of 8 years and a salvage value of $70000 at that time. Determine the depreciation allowance for the 5th year and the book value at the end of the 5th year using SLN. d5 = $   B5 = $ A surface mount placement machine is being purchased for $1419000; it has an estimated useful life of 8 years and a salvage value of $55200...
ABC Co. purchased a machine on April 1, 2014 for $82,000 with an estimated useful life...
ABC Co. purchased a machine on April 1, 2014 for $82,000 with an estimated useful life of 6 years and salvage value of $4,000.  They sold the machine on July 1, 2019, for $15,000.  Assuming ABC Co. uses the straight line method of depreciating its assets, the journal entry to record the sale of the machine would include a: A. Debit to Loss for $1,250 B. Credit to Machine for $13,750 C. Credit to Gain for $1,250 D. Credit to Accumulated Depreciation...
ABC company purchased equipment on January 1, 2015, for $50,000, with an estimated useful life of...
ABC company purchased equipment on January 1, 2015, for $50,000, with an estimated useful life of 5 years and an estimated residual value of $5,000. Assume the equipment was sold on April 30th 2017 for $25,000 Prepare journal entries for the following: A) Calculate depreciation expense for 2015 and 2016 using straight line method of depreciation. Prepare the journal entry to record depreciation B) Calculate depreciation for 2017 and record the journal entry C) Prepare the journal entry for the...
1) The Enterprise purchased an equipment on January 1st, 2011 that had an estimated useful life...
1) The Enterprise purchased an equipment on January 1st, 2011 that had an estimated useful life of 10 years.The equipment cost $50,000 and estimated residual value was $5,000 at the time of purchase. After three full years of use, the equipment was sold for cash and recognized a $3,000 gain on the sale of that equipment. How much cash did the enterprise receive for the equipment? 2) Aqua Company started the year with the following: Assets $100,000; Liabilities $60,000; Common...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT