On january 1, 2015, anodel inc. acquired a machine for $1,000,000. the estimated useful life of the asset is 5 years. the residual value at the end of 5 years is estimated to be $50,000. what is the book value of the machine at the end of 2016, if the company uses straight-line depreciation method.
a. $550,000
b. $570,000
c. $620,000
d. $600,000

c. $620,000

Explanation:

The computation of the book value is shown below:

The depreciation expense would be

= (Acquiring value of the machine - estimated residual value) ÷ (estimated useful life)

= ($1,000,000 - $50,000) ÷ (5 years)

= ($950,000) ÷ (5 years)  

= $190,000

The depreciation should be charged for 2 years so, the accumulated depreciation is

= $190,000 × 2 years

= $380,000

Now the book value

= Acquiring value of the machine - accumulated depreciation

= $1,000,000 - $380,000

= $620,000

1. c

2. b

3. a

4. c

5. a

6. b

7. c

8. c

9.b

10. d

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