Question

On January 1, 2016, Fisher Company purchases a machine that manufactures a part for one of its key products. The machine cost $210,000 and is estimated to have a useful life of 4 years, with an expected salvage value of $34,000. Compute (1) depreciation expense, (2) accumulated depreciation, and (3) net book value of the machine for 2017 using the straight-line methods.

A.483,000; 966,000; 167,400

B.44,000; 88,000; 122,000

C.44,000; 44,000; 166,000

D.35,200; 70,400; 139,600

Answer 1

The depreciation of each year is computed as shown below:

= (Cost of machine - salvage value) / 4

= ($ 210,000 - $ 34,000) / 4

= $ 176,000 / 4

= $ 44,000

So, the depreciation expense of 2017 is $ 44,000

The accumulated depreciation is computed as follows:

= Depreciation in 2016 + Depreciation in 2017

= $ 44,000 + $ 44,000

= $ 88,000

c. The book value is computed as follows:

= Cost of machine - Accumulated depreciation

= $ 210,000 - $ 88,000

= $ 122,000

So, the correct answer is option B.

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