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PART 4.ARAMCO company purchases factory machine at a cash price of $100,000. Related expenditures are sales taxes $3000, Insu
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Answer #1

Soluion:

1.

Cost component of the machine
Purchase price
Sales taxes
Installation and testing

Note: Installation exp. during transit only are included in the cost of machine but insurance after installation are not included in it.

2. Cost of machine = $100,000 + 3,000 + 1,500 = $104,500

3. Annual depreciation cost = ($104,500 - 2,000) / 6 = $17,083 (Rounded off to 0 decimal place)

4. Book value of machine at the end of 4th year = cost of machine - Depreciation. up to 4th year

= $104,500 - 17,083×4

= $36,168

Note: If we do not use rounded off amount of depreciation, book value of machine would be $36,167 (i.e. $104,500 - 17,083.33×4)

Note: If you have any query, ask me in the comment section. Please give thumbs(ratings) !!!

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