Miller Manufacturing purchased a packaging machine for $300,000 on January 2, 2015. The seller assumed that the machine would be functional for at least five years with no salvage value. In 2018, Miller decided that the machine would last an additional five years with a salvage value of $25,000. The company uses straight-line depreciation for all assets. What amount of depreciation should Miller record in 2018 and following years?

Question

Quizplus · Accepted Answer

The machine's book value at the beginning of 2018 is $120,000 ($300,000 - 3 years * $60,000). With a new useful life of 5 years and a salvage value of $25,000, the annual depreciation is ($120,000 - $25,000) / 5 = $19,000.

Miller Manufacturing Purchased a Packaging Machine for $300,000 on January