Question

Machinery was purchased for $440000 on January 1, 2022. Freight charges amounted to $14000 and there was a cost of $40000 for building a foundation and installing the machinery. It is estimated that the machinery will have a $60000 salvage value at the end of its 7-year useful life. What is the amount of accumulated depreciation at December 31, 2023 if the straight-line method of depreciation is used?

O $124000.
O $62000.
O $55143.
O $110286.

Answer 1

The amount of accumulated depreciation at December 31, 2023, using the straight-line method would be $108,572.

Step-by-step explanation:

To calculate the amount of accumulated depreciation using the straight-line method, we need to determine the annual depreciation expense. The formula for straight-line depreciation is:

Annual depreciation expense = (Cost of machinery - Salvage value) / Useful life

Using the given information:

Cost of machinery = $440,000

Salvage value = $60,000

Useful life = 7 years

So, the annual depreciation expense would be:

Annual depreciation expense = ($440,000 - $60,000) / 7 = $54,286

To find the accumulated depreciation at December 31, 2023, we need to calculate the total depreciation expense from the date of purchase to that date. Since the machinery was purchased on January 1, 2022, there would be 2 years of depreciation by December 31, 2023.

Accumulated depreciation = Annual depreciation expense x Number of years = $54,286 x 2 = $108,572

Therefore, the amount of accumulated depreciation at December 31, 2023, would be $108,572.