Question

New Morning Bakery is in the process of closing its operations. It sold its two-year-old bakery ovens to Great Harvest Bakery for $580,000. The ovens originally cost $778,000, had an estimated service life of 10 years, and an estimated residual value of $48,000. New Morning Bakery uses the straight-line depreciation method for all equipment. Required: 1. Calculate the balance in the accumulated depreciation account at the end of the second year.

Answer 1

The balance in the accumulated depreciation account at the end of the second year is $146,000.

Step-by-step explanation:

Straight line method charges a fixed depreciation charge on the asset during its period of use.

Depreciation Expense (Straight line) = Cost - Residual Amount ÷ Estimated Useful life

= $778,000 - $48,000 ÷ 10

= $73,000

Therefore, for each year, a depreciation expense of $73,000 is charged to profit an loss.

Accumulated Depreciation Calculation :

Depreciation Expense : Year 1 $73,000

Depreciation Expense : Year 2 $73,000

Total Expense $146,000