Use the following information for questions:
Maddie Co.purchased a machine on January 1, 2011 for $22,500.The machine had an estimated useful life of 10 years and an estimated residual value of $2,500.The company uses double-declining-balance amortization.
-Assuming Maddie Co.uses straight-line amortization, what would be the book value of the machine on December 31, 2021?
A)$ -0-
B)$2,000
C)$2,250
D)$2,500

Question

Quizplus · Accepted Answer

Using straight-line amortization, the annual depreciation expense is calculated as (Cost - Residual Value) / Useful Life. For this machine, it's ($22,500 - $2,500) / 10 = $2,000 per year. Over 10 years, the total depreciation would be $2,000 * 10 = $20,000. Thus, the book value on December 31, 2021, would be the original cost minus the total depreciation, which is $22,500 - $20,000 = $2,500.

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