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24 February, 11:54

On January 1, Year 1, Ballard company purchased a machine for $36,000. On January 1, Year 2, the company spent $11,000 to improve its quality. The machine had a $6,000 salvage value and a 6-year life, which are unchanged. Ballard uses the straight-line method. What is the book value of the machine on December 31, Year 4

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  1. 24 February, 13:44
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    Book value of the machine at the end of year 4 is $20400

    Explanation:

    The year one depreciation is computed using the below straight depreciation method:

    depreciation=cost-residual value/useful life = ($36,000-$6,000) / 6=$5,000

    after year one book value=$36,000-$5,000=$31,000

    year two depreciation = ($31,000+$11,000-$6,000) / 5=$7200

    year 4 book value=$42,000 - ($7200*3) = $20400

    depreciation from year 2 onwards remain the same
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