Question

A machine that cost $400,000 has an estimated residual value of $40,000 and an estimated useful life of four years. The company uses straight-line depreciation. Required:

1. Calculate the machine's depreciable cost.

2. Calculate the amount of depreciation expense that will be taken on the machine each year.

3. Calculate the machine's accumulated depreciation and book value at the end of each year.

Answer 1

1.machine's depreciable cost = (cost - estimated residual value) =>$400,000 - $40,000

=>$360,000.

2.amount of depreciation expense each year = depreciable cost / number of years of life

=>$360,000 / 4 years.

=>$90,000.

3.accumulated depreciation and book value at the end of each year.

year	depreciaton expense	accumulated depreciation	book value = cost - accumulated depreciation
1	$90,000	$90,000	$400,000-90,000=>$310,000
2	$90,000	$90,000+$90,000=>$180,000	$400,000-180,000=>$220,000
3	$90,000	$180,000+90,000=>$270,000	$400,000-270,000=>$130,000
4	$90,000	$270,000+90,000=>$360,000	$400,000-360,000=>$40,000