Question

On June 1, 2019, Turner Corporation purchased land, a building, and some equipment for $540,000. The...

On June 1, 2019, Turner Corporation purchased land, a building, and some
equipment for $540,000. The following information is available concerning
the property purchased:

                                 Current Market Value
  Land .......................           142,500
  Building ...................           262,200
  Equipment ..................           165,300

Before the property could be used, Turner had to spend $26,000 to renovate
the building and $14,000 to put the equipment in working order.

Assume the equipment was assigned a $9,500 residual value, a 15-year life,
and was being depreciated using the straight-line depreciation method.

Calculate the book value of the equipment at December 31, 2025.
Business   Accounting   
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Answer #1

Answer :

Book value of the equipment at December 31, 2025 = $101,685

Explanation :

Total market values of asets = 142,500 + 262,200 +165,300 = $570,000

Cost assigned to equipment = [ ($165,300 / $570,000) * $540,000 ] + $14,000 = $170,600

Depreciation as staight line method = [ ($170,600 - $9,500) / 15 years ] = $10,740

  • Depreciation for 2019 = $10,740 * 5/12 = $4,475
  • Depreciation for next 6 years (Jan 1 , 2020 to December 31 , 2025) = $10,740 * 6 = $64,440

Accumulated Depreciation till December 31, 2025 = $4,475 + $64,440 = $68,915

Book value of the equipment at December 31, 2025

= Cost of equipment - Accumulated Depreciation = $170,600 - $68,915 = $101,685

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