Machinery is purchased for $140,000. It is estimated that it has a useful life of 5 years and a residual value of $20,000. Using the straight-line method, the balance in the accumulated depreciation account at the end of the third year of the machine’s useful life is:$68,000$140,000$72,000$24,000
Question
Machinery is purchased for 20,000. Using the straight-line method, the balance in the accumulated depreciation account at the end of the third year of the machine’s useful life is:140,00024,000
Solution
The balance in the accumulated depreciation account at the end of the third year of the machine’s useful life is $72,000.
Here's how to calculate it:
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The straight-line method of depreciation spreads the cost of the asset evenly over its useful life.
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To calculate annual depreciation, subtract the residual value from the cost of the asset and then divide by the useful life of the asset. In this case, (20,000) / 5 = $24,000 per year.
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Accumulated depreciation is the total depreciation of the asset that has been recorded up to a specific point in time.
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So, at the end of the third year, the accumulated depreciation would be 3 years * 72,000.
Therefore, the balance in the accumulated depreciation account at the end of the third year of the machine’s useful life is $72,000.
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