Question

Tucker Company is considering replacing a machine. The machine had originally cost $12,000. It has accumulated depreciation of $4,000. The current market value of the machine is $7,000. Based on this information alone, what is the net book value of the machine?

1) $3,000
2) $7,000
3) $8,000
4) $11,000

Answer 1

The net book value of the machine is $8,000, calculated by subtracting the accumulated depreciation of $4,000 from the original cost of $12,000.

Step-by-step explanation:

The net book value of a machine is calculated by subtracting the accumulated depreciation from the original cost of the machine. In this scenario, the original cost of the machine is $12,000 and the accumulated depreciation is $4,000. Therefore, the net book value would be:

$12,000 (Original Cost) - $4,000 (Accumulated Depreciation) = $8,000 (Net Book Value)

The current market value of the machine, which is $7,000 in this case, does not affect the calculation of net book value.