Question

Archie Co. purchased a framing machine for $45,000 on January 1, 2021. The machine is expected to have a four-year life, with a residual value of $5,000 at the end of four years. Using the straight-line method, depreciation for 2021 and book value at December 31, 2021, would be:

Answer 1

Depreciation 2021 = $10,000

Book Value 2021 = $35,000

Step-by-step explanation:

Straight Line method charges a fixed amount of depreciation during the use of an asset.

Depreciation Charge = (Cost - Residual Value) ÷ Estimated Useful Life

Therefore,

Depreciation 2021 = ($45,000 - $5,000) ÷ 4

= $10,000

Book Value = Cost - Accumulated Depreciation to date

Therefore,

Book Value 2021 = $45,000 - $10,000

= $35,000