On January 1, 2013 Ballard Company spent $6,000 on an asset to improve its quality. The asset had been purchased on January 1, 2012 for $26,000. The asset had a $2,000 salvage value and a 6-year life. Ballard uses straight-line depreciation. What would be the book value of the asset on January 1, 2016?

Question

Quizplus · Accepted Answer

($26,000 cost - $2,000 salvage value)/6 years = $4,000 original annual depreciation; $26,000 - ($4,000 x 1 year) = $22,000 book value at the time of capital expenditure; ($22,000 book value + $6,000 capital expenditure - $2,000 salvage value)/5 years of remaining useful life = $5,200 new annual depreciation; $32,000 total cost of asset - $4,000 depr. in 2012 - $5,200 depr. in 2013 - $5,200 depr. in 2014 - $5,200 depr. in 2015 = $12,400 book value on 1/1/2016

On January 1, 2013 Ballard Company Spent $6,000 on an Asset