On January 1,2016 Ballard Company spent $12,000 on an asset to improve its quality.The asset had been purchased on January 1,2015 for $52,000.The asset had a $4,000 salvage value and a 6-year life.Ballard uses straight-line depreciation.What would be the book value of the asset on January 1,2019?

Question

Quizplus · Accepted Answer

The original cost of the asset is $52,000 with a salvage value of $4,000 and a 6-year life, so annual depreciation is ($52,000 - $4,000) / 6 = $8,000. By January 1, 2019, 4 years of depreciation have occurred, totaling $32,000. The book value before the improvement is $52,000 - $32,000 = $20,000. The $12,000 improvement increases the book value to $32,000. After one more year of depreciation in 2018, the book value is $32,000 - $8,000 = $24,000.

On January 1,2016 Ballard Company Spent $12,000 on an Asset