Lemon Company bought a machine on January 1, 2019. The machine cost $72,000 and had an expected salvage value of $12,000. The life of the machine was estimated to be 5 years. Using straight line depreciation, the book value of the machine at the beginning of the third year would be:

Question

Quizplus · Accepted Answer

The annual depreciation expense is calculated as (Cost - Salvage Value) / Useful Life = ($72,000 - $12,000) / 5 = $12,000 per year. After 2 years, the accumulated depreciation is $12,000 * 2 = $24,000. Therefore, the book value at the beginning of the third year is Cost - Accumulated Depreciation = $72,000 - $24,000 = $48,000.

Lemon Company Bought a Machine on January 1, 2019