A machine was purchased for $40,000. It has a current carrying value of $26,000 and had a depreciable cost of $36,000. Its estimated residual value must have been
A) $4,000.
B) $10,000.
C) $14,000.
D) impossible to determine from the facts given.

Question

Quizplus · Accepted Answer

The estimated residual value is the value of the asset at the end of its useful life, and it is used to calculate depreciation.

Since the depreciable cost of the machine was $36,000 ($40,000 - $4,000), and its current carrying value is $26,000, the accumulated depreciation is $10,000 ($36,000 - $26,000).

Therefore, the estimated residual value must have been $4,000 ($10,000 + $4,000 = $14,000, which is the depreciable cost minus the current carrying value).

Therefore, the correct answer is A.

A Machine Was Purchased for $40,000