Question

CNN reported in early 2018 that higher-income shoppers are the biggest bargain shoppers searching Amazon, clicking on their mobile devices and even querying Alexa looking for the best deals. If Rebecca Johnson purchased a state-of-the-art Biologique Recherche facial machine for her home business for $123,000, with a useful life of 4 years and a residual value of $42,500.

What would be the book value of the machine after the first year using the straight-line depreciation method?

Answer 1

$92,875

Explanation:

To calculate the book value of the machine after the first year using the straight-line depreciation method, you would need to subtract the annual depreciation expense from the original cost of the machine. The annual depreciation expense is calculated by subtracting the residual value of the machine from the original cost and dividing that amount by the useful life of the machine in years.

In this case, the annual depreciation expense would be calculated as follows:

Annual depreciation expense = ($123,000 - $42,500) / 4 years = $30,125 per year

Therefore, the book value of the machine after the first year would be:

Book value = $123,000 - $30,125 = $92,875

This means that the machine would be recorded on Rebecca's balance sheet as having a value of $92,875 after the first year of use.

Answer 2

To calculate the book value of the Biologique Recherche facial machine after the first year using the straight-line depreciation method, we can use the following formula:

Book Value = Cost - (Depreciation Expense * Number of Years Depreciated)

In this case, the cost of the machine is $123,000, the useful life is 4 years, and the residual value is $42,500. We can use these values to calculate the annual depreciation expense as follows:

Annual Depreciation Expense = (Cost - Residual Value) / Useful Life

= ($123,000 - $42,500) / 4

= $30,375

To calculate the book value of the machine after the first year, we can plug these values into the formula above:

Book Value = $123,000 - ($30,375 * 1)

= $123,000 - $30,375

= $92,625

Therefore, the book value of the Biologique Recherche facial machine after the first year using the straight-line depreciation method would be $92,625.