Question

1. On January 1, 2018, Sanderson Company acquired a machine for $1,060,000. The estimated useful life...

1. On January 1, 2018, Sanderson Company acquired a machine for $1,060,000.

The estimated useful life of the asset is five years. Residual value at the end of five years is estimated to be $109,000.

What is the book value of the machine at the end of 2019 if the company uses the straight−line

method of depreciation?

2. An asset was purchased for $33,000 on January 1, 2019. The asset's estimated useful life was five years, and its residual value was $4,000. The straight-line method of depreciation was used. Calculate the gain or loss if the asset is sold for $26,000 on December 31, 2019, the last day of the accounting period.

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Answer #1

Answer:- 1)- The book value of the machine at the end of 2019 if the company uses the straight−line method of depreciation is= $679600

Explanation:-

Straight line Method:-

= Cost of asset- Salvage value of asset/No. of useful life (years)

=($1060000-$109000)/5 years

=$951000/5 years = $190200

2018 year depreciation =$190200

Book value at 2018 year =$1060000-$190200=$869800       

2019 year depreciation =$190200

Book value at 2019 year =$869800-$190200=$679600

2)- The loss on asset is ($1200).

Explanation:-

Straight line Method:-

= Cost of asset- Salvage value of asset/No. of useful life (years)

=($33000-$4000)/5 years

=$29000/5 years = $5800

2019 year depreciation =$5800

Book value at 2018 year =$33000-$5800=$27200

Loss on asset =$2600-$27200

=- $1200

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