Mohr Company purchases a machine at the beginning of the year at a cost of $29,000. The machine is depreciated using the straight-line method. The machine’s useful life is estimated to be 5 years with a $7,000 salvage value. The book value of the machine at the end of year 2 is:
$13,200.
$8,800.
$22,000.
$20,200.
$4,400.
Correct answer-----------$20,200
Working
Straight line Method | ||
A | Cost | $ 29,000 |
B | Residual Value | $ 7,000 |
C=A - B | Depreciable base | $ 22,000 |
D | Life [in years left ] | 5 |
E=C/D | Annual SLM depreciation | $ 4,400.00 |
.
Depreciation schedule-Straight line method | ||||
Year | Book Value | Depreciation expense | Accumulated Depreciation | Ending Book Value |
1 | $ 29,000.00 | $ 4,400.00 | $ 4,400.00 | $ 24,600.00 |
2 | $ 24,600.00 | $ 4,400.00 | $ 8,800.00 | $ 20,200.00 |
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