Sampras Company purchased a machine for $30 000 on 1 January 2010 with an estimated life of 5 years and a residual value of zero.The straight-line method of depreciation is used.What is the carrying value of the machine on the 31 December 2011 in the balance sheet of Sampras Company?

Question

Quizplus · Accepted Answer

The annual depreciation expense can be calculated as follows: 
Depreciation expense per year = (cost - residual value) / useful life 
= ($30,000 - $0) / 5 years 
= $6,000 per year

For the year 2010, the depreciation expense would be $6,000, and the carrying value at the end of the year would be $24,000 ($30,000 - $6,000). 
For the year 2011, the depreciation expense would be another $6,000, and the carrying value at the end of the year would be $18,000 ($24,000 - $6,000). Therefore, the carrying value of the machine on 31 December 2011 in the balance sheet of Sampras Company is $18,000.

Sampras Company Purchased a Machine for $30 000 on 1