Question

On January 1, Year 1, Ballard company purchased a machine for $58,000. On January 1, Year 2, the company spent $22,000 to improve its quality. The machine had a $14,800 salvage value and a 6-year life, which are unchanged. Ballard uses the straight-line method. What is the book value of the machine on December 31, Year 4?

• $23,200

• $21,600

• $11,600

• $38,000

Answer 1

Particulars	Amount (in $)
Machine Cost	$58,000
Less: Depreciation           ($58,000 - $14,800)/6 years	($7,200)
Book Value at beginning of, Year 2	$50,800
Add: Improvements	$22,000
	$72,800
Less: Accumulated Depreciation for 3 years               ($72,800 (-) $14,800) x 3/5 years	($34,800)
Book Value Dec 31, Year 4	$38,000
Book Value of the Machine on December 31 , Year 4   = $38,000
From given options, option (d) is correct i.e., $38,000