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Marsh Corporation purchased a machine on July 1, 2010, for $1,250,000. The machine was estimated to...

Marsh Corporation purchased a machine on July 1, 2010, for $1,250,000. The machine
was estimated to have a useful life of 10 years with an estimated salvage value of $70,000. During 2013, it became apparent that the machine would become uneconomical after December 31, 2017, and that the machine would have no scrap value. Accumulated depreciation on this machine as of December 31, 2012, was $295,000. What should be the charge for depreciation in 2013 under generally accepted accounting principles? a. $177,000 b. $191,000 c. $205,000 d. $238,750

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Answer #1

Ans: ( B) $ 191,000

1) Cost: $ 1,250,000 ( given)

2) Useful life in no. of year: 10 years

3) Accumulated depreciation on this machine as of December 31, 2012, $ 295,000

4) New Scrape Value : $0

5) Machine was purchased on july ,2010 and become uneconomical after 2017:

Total remaing life : 5 year ( 7 -2) ( i.e 2013 to 2017)

6) 2013 Depreciation as per GAAP:

Straight line Depreciation:

= (Book value - Salvae value) ÷ Remaining life

= ( $ 1,250,000 -$ 295,000 - 0) ÷ 5 year

= $ 191,000

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