On January 1, Year 1, Ballard company purchased a machine for $44,000. On January 1, Year 2, the company spent $15,000 to improve its quality. The machine had a $9,200 salvage value and a 6-year life, which are unchanged. Ballard uses the straight-line method. What is the book value of the machine on December 31, Year 4?
A)$26,800
B)$17,600
C)$8,800
D)$23,800

Question

Quizplus · Accepted Answer

The book value of the machine on December 31, Year 4 is $26,800. The machine was purchased for $44,000 and has a salvage value of $9,200. The machine has a 6-year life, so the annual depreciation expense is $5,700 ($44,000 - $9,200 / 6). The machine has been depreciated for 4 years, so the book value is $44,000 - $5,700 * 4 = $26,800.

On January 1, Year 1, Ballard Company Purchased a Machine