Machinery was purchased for $460000 on January 1, 2022. Freight charges amounted to $15000 and there was a cost of $34000 for building a foundation and installing the machinery. It is estimated that the machinery will have a $65000 salvage value at the end of its 10-year useful life. What is the amount of accumulated depreciation at December 31, 2023 if the straight-line method of depreciation is used?

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Business

Ash

7 June, 18:01

Machinery was purchased for $460000 on January 1, 2022. Freight charges amounted to $15000 and there was a cost of $34000 for building a foundation and installing the machinery. It is estimated that the machinery will have a $65000 salvage value at the end of its 10-year useful life. What is the amount of accumulated depreciation at December 31, 2023 if the straight-line method of depreciation is used?

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Jack Sims · Answer 1

The amount of accumulated depreciation at December 31, 2023 = $88,800.

Explanation:

Determining the actual acquisition cost.

The actual acquisition cost = Purchase value + freight charges + Installation costs.

The actual acquisition cost = 460,000 + 15,000 + 34,000.

The actual acquisition cost = $509,000.

Determining the depreciable cost.

The depreciable cost = acquisition cost - Salvage value.

The depreciable cost = 509,000 - 65000.

The depreciable cost = $444,000.

Determining annual depreciation expense.

Annual depreciation expense = depreciable cost / number of years.

Annual depreciation expense = 444,000 / 10.

Annual depreciation expense = 44,400.

Determining the accumulated depreciation.

The accumulated depreciation = annual depreciation expense * number of years.

The accumulated depreciation = 44,400 * 2.

The amount of accumulated depreciation at December 31, 2023 = $88,800.