Scandsia Ltd. owns a machine that it purchased on Jan 1, 2010 for $750,000. The machine had an estimated useful life of 5 years and an estimated residual value of $50,000. The company uses straight-line depreciation and records monthly depreciation. The machine was sold on December 31, 2013 for $200,000. What is the carrying value (net book value)at the date of sale?

Question

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The total depreciation for the machine is ($750,000 - $50,000) / 5 = $140,000 per year or $11,667 per month. As of December 31, 2013, the machine would have been depreciated for 48 months, with a total accumulated depreciation of $11,667 x 48 = $560,000. Therefore, the carrying value (net book value) of the machine at the date of sale would be $750,000 - $560,000 = $190,000.