MacKenzie Manufacturing purchased equipment for $160,000.In addition,shipping charges of $2,000 were incurred to obtain the equipment.The company paid $12,500 to construct a foundation and install the equipment.The equipment is estimated to have a residual value of $15,000 at the end of its 5-year useful life. Using the straight-line method,what is the book value of the equipment at the end of the third full year of use?

Question

Quizplus · Accepted Answer

Depreciation expense = (Cost − Residual value)× (1 ÷ Useful life)
= [($160,000 + $2,000 + $12,500)− $15,000] ÷ 5 years = $31,900 per year
Net book value = Cost − Accumulated depreciation
= ($160,000 + $2,000 + $12,500)− ($31,900 per year × 3 years)= $78,800

MacKenzie Manufacturing Purchased Equipment for $160,000