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.

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