Cola Company purchased a bottling machine on October 1,2018 for $250,000.The estimated useful life is 25 years and they are using straight-line depreciation.On October 1,2019,they spent $46,000 on the machine to double its capacity and $5,000 on routine cleaning.The company's year end is September 30.What should the depreciation expense be at September 30,2020?
A)$10,000
B)$30,000
C)$12,200
D)$11,9170

Question

Quizplus · Accepted Answer

The original cost of the machine is $250,000 with a useful life of 25 years, resulting in an annual depreciation of $10,000. On October 1, 2019, $46,000 was spent to double its capacity, which is a capital expenditure and should be added to the asset's cost, making the new total $296,000. The $5,000 for routine cleaning is an expense and not added to the asset's cost. The depreciation for the year ending September 30, 2020, should be calculated on the new cost basis of $296,000 over the remaining 24 years, which equals $12,333.33. However, since the machine's capacity was doubled, it implies that the useful life might not have been extended; thus, the depreciation calculation might need to consider the enhanced productivity or capacity rather than an extended useful life. Given the choices provided and the information, the closest correct calculation based on the new cost basis and the original useful life would be $11,840 ($296,000 / 25 years), but this option is not provided. Therefore, based on the provided options, there seems to be a misunderstanding in the calculation or a typographical error in the options. The correct approach to calculate depreciation with the given data would indeed involve adjusting for the new cost basis and reassessing the asset's useful life or depreciation method if necessary, but with the options given, none directly match the expected calculation.

Cola Company Purchased a Bottling Machine on October 1,2018 for $250,000.The