Clear Restorations purchased a floor machine for $10,520. Delivery costs totaled $1,250. The salvage value is $1,350 after 8 years. Using the straight-line depreciation method, calculate the book value at the end of year 5.
A) $1,302.50
B) $5,257.50
C) $6,512.50
D) $7,525.50

Question

Quizplus · Accepted Answer

The book value at the end of year 5 using the straight-line depreciation method can be calculated as follows: First, find the total cost of the machine, which is the purchase price plus delivery costs, $10,520 + $1,250 = $11,770. The total depreciation over 8 years is the cost minus the salvage value, $11,770 - $1,350 = $10,420. The annual depreciation is $10,420 / 8 = $1,302.50. After 5 years, the total depreciation is $1,302.50 * 5 = $6,512.50. Therefore, the book value at the end of year 5 is the cost minus the accumulated depreciation, $11,770 - $6,512.50 = $5,257.50.

Clear Restorations Purchased a Floor Machine for $10,520