On January 1, 2013, Zane Manufacturing Company purchased a machine for $40,000. The company expects to...

On January 1, 2013, Zane Manufacturing Company purchased a machine for $40,000. The company expects to use the machine a total of 24,000 hours over the next 6 years. The estimated sales price of the machine at the end of 6 years is $4,000. The company used the machine 8,000 hours in 2013 and 12,000 in 2014. What is the book value of the machine at the end of 2014 if the company uses straight-line depreciation? A) $10,000 B) $28,000 C) $17,778 D) $20,000

Expert Solution

Annual depreciation expense under straight-line method = (Cost - salvage value)/Useful life

= ($40,000 - $4,000) / 6

= $6,000

Accumulated depreciation at the end of 2014 = $6,000 x 2 = $12,000

Therefore,

Book value at the end of 2014 = Cost - Accumulated depreciation = $40,000 - $12,000 = $28,000

The correct answer is B) $28,000.

ekkarill92 answered 1 year ago

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