Scandsia Ltd. owns a machine that it purchased on Jan 1, 2019 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, 2022 for $200,000. What is the carrying value (net book value)at the date of sale?

Question

Quizplus · Accepted Answer

First, we need to find the monthly depreciation expense: 
Total depreciation = (cost - residual value) / useful life 
= ($750,000 - $50,000) / 5 
= $140,000 per year 
Monthly depreciation = $140,000 / 12 = $11,667 
Then, we need to calculate the accumulated depreciation up to December 31, 2022: 
Accumulated depreciation = monthly depreciation x number of months of use 
= $11,667 x 48 months 
= $560,016 
Finally, we can calculate the carrying value (net book value) at the date of sale: 
Carrying value = cost - accumulated depreciation 
= $750,000 - $560,016 
= $189,984 
So, the best answer is C, $190,000, which is the closest to the calculated net book value.