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7 November, 14:56

Viva Company bought machine X for $18,000 two years ago. The machine had no residual value and had an estimated useful life of 10 years. If the company uses the straight-line depreciation method, calculate the current book value of the machine.

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  1. 7 November, 17:48
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    The current book value of the machine: $14,400

    Explanation:

    Viva Company uses straight-line depreciation method, Depreciation Expense each year is calculated by following formula:

    Annual Depreciation Expense = (Cost of machine - Residual Value) / Useful Life = ($18,000 - $0) / 10 = $1,800

    Depreciation Expense for year 1 = Depreciation Expense for year 2 = $1,800

    Accumulated depreciation at the end of year 2 = $1,800 + $1,800 = $3,600

    The current book value of the machine = Cost of the machine - Accumulated depreciation at the end of year 2 = $18,000 - $3,600 = $14,400
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