Question

On January 1, 2019, ABC Company paid $235,000 to buy three pieces of machinery. The fair...

On January 1, 2019, ABC Company paid $235,000 to buy
three pieces of machinery. The fair market values of
the machines on the purchase date were:

Machine A ............     $80,850
Machine B ............     $98,000
Machine C ............     $66,150

Before the machines could be used, ABC Company had to
spend $9,000 to get Machine B in working order.

Machine B was assigned a $7,000 residual value and
a 10-year life. Machine B will be depreciated using
the straight-line depreciation method.

Calculate the book value of Machine B at December 31, 2025.
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Answer #1

Answer : $27,000

Straight line Method :

MAchine B,
: Purchased on January 1st, 2019

Cost of the Machine B = Purchase Price + Additional cost

= 98,000+9000 = 107,000

REsidula Valaue = 7,000

Life in years = 10

Annual Depreciaon = ( Cost - Residual Value ) / Life in years

= (107,000-7,000) /10 = 10,000Per annuma

Accumulated Deprecaion up to Dec 31 2025= ( 8 years *10,000 ) = 80,000

Book Value = Cost of the MAchine - Accumulated Depreciation

= 107,000-80,000 = $27,000 (Answer)

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