Homework Answers
The Correct Answer is C.688,400.
Calculation of depreciation to be charged
Straight Line method of depreciation = (Cost of Asset - Residual Value) / Useful Life of Asset
Cost of Asset = $1,110,000
Residual Value = $56,000
Useful Life of Asset = 5 years
Depreciation amount = ($1,110,000 - $56,000) / 5
= $1054000 / 5
= $210,800
We need to calculate book value of asset at the end of year 2019. This means that we have to charge depreciation for 2 years since the asset was acquired at the beginning of 2018.
Year 2018 - Depreciation for full year
Year 2019 - Depreciation for full year since we are required to find the book value at the end of 2019.
Therefore book value of machine at the end of 2019 = Cost of Machine - Depreciation for 2 years
= $1,110,000 - (2 * $210,800)
= $1,110,000 - 421,600
= $688,400
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