Joseph Corporation purchased an extruding machine on January 1, 2016 for $30,000. The machine is expected to be used for 5 years, and the company believes an equal portion of the cost should be allocated to each accounting period. Based on this information, what is the net book value of the machine on January 1, 2018?

Question

Quizplus · Accepted Answer

The machine costs $30,000 and is expected to be used for 5 years, so the annual depreciation is $30,000 / 5 = $6,000. By January 1, 2018, two years of depreciation have occurred, totaling $12,000 ($6,000 per year x 2 years). The net book value is the original cost minus accumulated depreciation: $30,000 - $12,000 = $18,000.

Joseph Corporation Purchased an Extruding Machine on January 1, 2016