Norwood, Inc.purchased a crane at a cost of $80,000.The crane has an estimated residual value of $5,000 and an estimated life of 8 years, or 12,500 hours of operation.The crane was purchased on January 1, 2016 and was used 2,700 hours in 2016 and 2,600 hours in 2017.

-Refer to the information about Norwood, Inc.
If Norwood uses the straight-line method, what is the book value at December 31, 2018?

Question

Norwood, Inc.purchased a crane at a cost of $80,000.The crane has an estimated residual value of $5,000 and an estimated life of 8 years, or 12,500 hours of operation.The crane was purchased on January 1, 2016 and was used 2,700 hours in 2016 and 2,600 hours in 2017.
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-Refer to the information about Norwood, Inc. ​
If Norwood uses the straight-line method, what is the book value at December 31, 2018?

Quizplus · Accepted Answer

The straight-line depreciation method spreads the cost of the asset evenly over its useful life. The annual depreciation expense is calculated as (Cost - Residual Value) / Useful Life. For the crane, this is ($80,000 - $5,000) / 8 = $9,375 per year. By December 31, 2018, three years of depreciation have accumulated, totaling $9,375 * 3 = $28,125. The book value at December 31, 2018, is the original cost minus the accumulated depreciation: $80,000 - $28,125 = $51,875.