Viva Ltd had bought machine X for $15,900 2 years ago.The machine had no residual value and had an estimated useful life of 10 years.If the company uses the straight-line depreciation method,calculate the current book value of the machine.

Question

Quizplus · Accepted Answer

Using the straight-line depreciation method, we can calculate the annual depreciation as follows:

Annual Depreciation = (Cost of Machine - Residual Value)/Useful life

Since the machine has no residual value, the annual depreciation is:

Annual Depreciation = $15,900/10 = $1,590

After 2 years, the accumulated depreciation would be:

Accumulated Depreciation = Annual Depreciation x Number of Years = $1,590 x 2 = $3,180

The current book value of the machine would be:

Book Value = Cost of Machine - Accumulated Depreciation

Book Value = $15,900 - $3,180 = $12,720

Therefore, the correct answer is A) $12,720.

Viva Ltd Had Bought Machine X for $15,900 2 Years