On January 1,20x1,MBC purchased a pattern-making machine for $400,000 cash.The machine had an estimated useful life of 25 years and a residual value of $10,000.At the beginning of 20x6,the machine was given a major overhaul,which cost $28,000.The overhaul cost was properly debited to the asset account.The overhaul did not change the estimated residual value but did change the total estimated life to 30 years.The accounting period ends December 31.MBC should recognize 20x6 depreciation of:

Question

Quizplus · Accepted Answer

The original cost of the machine was $400,000 with a residual value of $10,000, giving a depreciable base of $390,000 over 25 years, resulting in annual depreciation of $15,600. By 20x6, 5 years of depreciation have been recorded, leaving a book value of $322,000. Adding the $28,000 overhaul cost, the new book value is $350,000. With a new useful life of 30 years from the purchase date, 25 years remain. The new annual depreciation is ($350,000 - $10,000) / 25 = $13,600.

On January 1,20x1,MBC Purchased a Pattern-Making Machine for $400,000 Cash