Question

Consider that a company bought a machine for 72,540 dollars. This equipment is assumed to have a life of 15 years and a salvage value of 1,590 dollars. Compute the remaining value recorded in the accounting book for this machine at the end of year 3 based on the straight line depreciation method - standard method, not using US depreciation tables. (note: round your answer to the nearest cent, and do not include spaces, currency signs, plus or minus signs, or commas)

Answer 1

58,350 dollars

Step-by-step explanation:

In straight line depreciation, we calculate annual depreciation by using the formula shown below:

Annual Depreciation =
`(Cost - Salvage)/(Useful Life)`

Given,

Cost is 72,540

Salvage Value is 1590

Useful Life = 15 years

We have:

Annual Depreciation = 72540-1590/15 = 4730

At end of Year 3, the total depreciation would be:

4730 * 3 = 14,190

The remaining value of the item would be:

Cost - Total Depn for 3 years

72,540 - 14,190

= 58,350 dollars