Ask Question
7 October, 03:23

At the beginning of 2020, Earth Co purchased a machine at a cost of $40,000. Earth Co expects the machine to remain useful for eight years (5,000 machine hours) and to have a residual value of $5,000. Earth Co expects the machine to be used 1,200 hours the first year. Using straight-line depreciation compute the depreciation expense and determine net book value. Depreciation Expense $4,375, net book value $35,625 Depreciation Expense $8,400, net book value $31,600 Depreciation Expense $10,000, net book value $30,000 Depreciation Expense $0, net book value $40,000

+5
Answers (1)
  1. 7 October, 04:37
    0
    Option B Depreciation Expense $8,400, net book value $31,600

    Explanation:

    The depreciation can be calculated using the following formula:

    Depreciation For Y1 = (Cost - Residual Value) * Hours consumed / T. Hours

    Here

    Cost is $40,000

    Residual Value is $5,000

    Hours consumed are 1,200 hours

    Total Hours are 5,000 hours

    Now by putting values, we have:

    Depreciation For Y1 = ($40,000 - $5,000) * 1200 / 5000

    Depreciation For Y1 = $8,400

    Now Net Book Value can be calculated using the following formula:

    Net Book Value = Cost - Accumulated Depreciation

    Net Book Value = $40,000 - $8400 = $31,600

    Hence the right answer is option B.
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “At the beginning of 2020, Earth Co purchased a machine at a cost of $40,000. Earth Co expects the machine to remain useful for eight years ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers