Claflin Construction Company purchased a machine on January 1, 2011 for $411,000. The machine has an estimated useful life of 8 years and a salvage value of $27,000. In 2013, Claflin determines that the machine will actually have a total useful life of 5 years and the salvage value will be $15,000. If Claflin uses straight-line depreciation, what will be the balance of the accumulated depreciation account on December 31, 2013?

Question

Quizplus · Accepted Answer

Straight-line depreciation is calculated as (cost - salvage value) / useful life.

Using the original estimate:

($411,000 - $27,000) / 8 = $48,000 depreciation per year.

Accumulated depreciation for 2011-2012:

2 years X $48,000 = $96,000.

Book value as of December 31, 2012:

$411,000 - $96,000 = $315,000.

Using the revised estimate:

($411,000 - $15,000) / 5 = $79,200 depreciation per year.

Accumulated depreciation for 2013:

1 year X $79,200 = $79,200.

Total accumulated depreciation as of December 31, 2013:

$96,000 + $79,200 = $175,200.

Therefore, the balance of the accumulated depreciation account on December 31, 2013 is $175,200. Option D is correct.

Claflin Construction Company Purchased a Machine on January 1, 2011