Question

On January​ 1, 2018,​ Sanderson, Inc. acquired a machine for $ 1 comma 010 comma 000. The estimated useful life of the asset is five years. Residual value at the end of five years is estimated to be $ 55 comma 000. What is the book value of the machine at the end of 2019 if the company uses the straightminusline method of​ depreciation?

Answer 1

Book value= 764,000

Step-by-step explanation:

Giving the following information:

Purchase price= $1,010,000

Salvage value= $55,000

Useful life= 5

First, we need to calculate the depreciation expense using the following formula:

Annual depreciation= (original cost - salvage value)/estimated life (years)

Annual depreciation= (1,010,000 - 55,000)/5= $191,000

Now, the book value:

Book value= 955,000 - 191,000= $764,000