Archie Co. purchased a framing machine for $45,000 on January 1, 2018. The machine is expected to have a four-year life, with a residual value of $5,000 at the end of four years.
-Using the straight-line method, depreciation for 2018 and book value at December 31, 2018, would be:
A) $10,000 and $30,000.
B) $11,250 and $28,750.
C) $10,000 and $35,000.
D) $11,250 and $33,750.

Question

Archie Co. purchased a framing machine for $45,000 on January 1, 2018. The machine is expected to have a four-year life, with a residual value of $5,000 at the end of four years. 
-Using the straight-line method, depreciation for 2018 and book value at December 31, 2018, would be:
A) $10,000 and $30,000.
B) $11,250 and $28,750.
C) $10,000 and $35,000.
D) $11,250 and $33,750.

Quizplus · Accepted Answer

Depreciation in 2018 = ($45,000 - 5,000) ÷ 4 = $10,000
Book value, 12/31/2018 = $45,000 - 10,000 = $35,000

Archie Co Purchased a Framing Machine for $45,000 on January 1