Growth Industries purchased a generator for $40,500. Delivery costs totaled $1,424 and handling costs were $2,626. The useful life is 6 years and the salvage value is $12,020. Using the straight-line depreciation method, calculate the book value at the end of year 4.
A) $15,860.65
B) $21,686.68
C) $22,863.32
D) $37,713.33

Question

Quizplus · Accepted Answer

The total cost of the generator is the purchase price plus delivery and handling costs: $40,500 + $1,424 + $2,626 = $44,550. The annual depreciation expense using the straight-line method is (Cost - Salvage Value) / Useful Life = ($44,550 - $12,020) / 6 = $5,421.67. After 4 years, the accumulated depreciation is $5,421.67 * 4 = $21,686.68. The book value at the end of year 4 is the cost minus the accumulated depreciation: $44,550 - $21,686.68 = $22,863.32.

Growth Industries Purchased a Generator for $40,500