On January 1,Year 1,Ballard company purchased a machine for $52,000.On January 1,Year 2,the company spent $12,000 to improve its quality.The machine had a $4,000 salvage value and a 6-year life,which are unchanged.Ballard uses the straight-line method.What is the book value of the machine on December 31,Year 4?
A)$24,800
B)$20,800
C)$10,400
D)$24,000

Question

Quizplus · Accepted Answer

Annual depreciation expense for Year 1 = (Cost of $52,000 - Salvage value of $4,000)÷ 6 years = $8,000
Book value at end of Year 1 = Cost of $52,000 - Accumulated depreciation of $8,000 = $44,000
Annual depreciation expense for Years 2 through Year 6 = (Book value of $44,000 + Expenditure of $12,000 - Salvage value of $4,000)÷ Remaining years of 5 = $10,400
Book value at end of Year 4 = Cost of $52,000 + Expenditure of $12,000 - Accumulated depreciation of ($8,000 + $10,400 + $10,400 + $10,400)= $24,800

On January 1,Year 1,Ballard Company Purchased a Machine for $52,000