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Maryam Co.purchased a machine on January 1,2020 for $22,500.The machine had an estimated useful life of 10 years and an estimated residual value of $2,500.The company uses double-declining-balance depreciation.
-If Maryam Co.used the straight-line method of depreciation,what would the carrying value of the machine be at the end of 2020?
A)$20,500
B)$20,250
C)$18,250
D)$18,000

Question

Quizplus · Accepted Answer

Straight-line depreciation is calculated by subtracting the estimated residual value from the initial cost and then dividing the result by the estimated useful life in years.

Annual Depreciation = (Initial Cost - Residual Value)/Useful Life
Annual Depreciation = ($22,500 - $2,500)/10 years
Annual Depreciation = $2,000

Therefore, at the end of 2020 (assuming no partial year depreciation), the carrying value of the machine would be:

Carrying Value = Initial Cost - Accumulated Depreciation
Carrying Value = $22,500 - ($2,000 x 1 year)
Carrying Value = $20,500

Therefore, the correct answer is A) $20,500.

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