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On January 2, 2016, Alpha Company acquired a new machine by signing a 5 year note...

On January 2, 2016, Alpha Company acquired a new machine by signing a 5 year note for $62,000. The estimated service life is eight years and the total units of output to be 200,000. The estimated residual value is $8,000. Using the straight-line method, how much is: (Enter only whole dollar values.)  

  1. the 2017 depreciation expense
  2. the accumulated depreciation after the fiscal year 2017 adjusting entry
  3. the book value of the machine after the fiscal year 2017 adjusting entry
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Answer #1

Cost of machine = $62,000

Useful life = 8 years

Residual value = $8,000

Annual depreciation expense = (Cost of machine-Residual value)/Useful life

= (62,000-8,000)/8

= 54,000/8

= $6,750

2017 Depreciation expense = $6,750

Accumulated depreciation expense for 2 years = Annual depreciation expense x 2

= 6,750 x 2

= $13,500

The accumulated depreciation after the fiscal year 2017 = $13,500

The book value of the machine after the fiscal year 2017 = Cost of machine-Accumulated depreciation expense for 2 years

= 62,000-13,500

= $48,500

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