A machine was purchased on January 1 for $100,000. The machine has an estimated useful life of 5 years with a salvage value of $20,000. Under the straight-line method, the book value and the accumulated depreciation of the machine at the end of year two is respectively,

Question

Quizplus · Accepted Answer

Straight-line method calculates depreciation by dividing the depreciable cost (cost - salvage value) by the estimated useful life of the asset.

Depreciable cost = $100,000 - $20,000 = $80,000

Depreciation expense per year = $80,000 / 5 years = $16,000

At the end of year two, the accumulated depreciation would be 2 years x $16,000 per year = $32,000.

Book value = cost - accumulated depreciation = $100,000 - $32,000 = $68,000.

Therefore, the book value and accumulated depreciation of the machine at the end of year two is respectively $68,000 and $32,000.

A Machine Was Purchased on January 1 for $100,000