Grover,Inc. Grover,Inc.purchased a crane at a cost of $80,000.The crane has an estimated residual value of $5,000 and an estimated life of 8 years,or 12,500 hours of operation.The crane was purchased on January 1,2013 and was used 2,700 hours in 2013 and 2,600 hours in 2014.
Refer to the information about Grover,Inc.
If Grover uses the straight-line method,what is the book value at December 31,2015?

Question

Quizplus · Accepted Answer

The straight-line depreciation method calculates annual depreciation as (Cost - Residual Value) / Useful Life. For the crane: ($80,000 - $5,000) / 8 = $9,375 per year. By December 31, 2015, three years of depreciation have occurred: 3 * $9,375 = $28,125. The book value is the cost minus accumulated depreciation: $80,000 - $28,125 = $51,875.