Mohr Company purchases a machine at the beginning of the year at a cost of $38,000. The machine is depreciated using the straight-line method. The machine’s useful life is estimated to be 5 years with a $7,000 salvage value. The book value of the machine at the end of year 2 is:Multiple Choice$6,200.$25,600.$31,000.$12,400.$18,600.
Question
Mohr Company purchases a machine at the beginning of the year at a cost of 7,000 salvage value. The book value of the machine at the end of year 2 is:Multiple Choice25,600.12,400.$18,600.
Solution
To calculate the book value of the machine at the end of year 2, we first need to calculate the annual depreciation expense.
Step 1: Calculate the total depreciable amount. This is the cost of the machine minus the salvage value. 7,000 (salvage value) = $31,000 (total depreciable amount)
Step 2: Calculate the annual depreciation expense. This is the total depreciable amount divided by the useful life of the machine. 6,200 (annual depreciation expense)
Step 3: Calculate the accumulated depreciation at the end of year 2. This is the annual depreciation expense multiplied by the number of years. 12,400 (accumulated depreciation)
Step 4: Calculate the book value at the end of year 2. This is the cost of the machine minus the accumulated depreciation. 12,400 (accumulated depreciation) = $25,600 (book value at the end of year 2)
So, the book value of the machine at the end of year 2 is $25,600.
Similar Questions
Mohr Company purchases a machine at the beginning of the year at a cost of $46,000. The machine is depreciated using the units-of-production method. The company estimates it will use the machine for 5 years, during which time it anticipates producing 84,000 units. The machine is estimated to have a $4,000 salvage value. The company produces 10,800 units in year 1 and 7,800 units in year 2. Depreciation expense in year 2 is:Multiple Choice$18,400.$27,600.$4,000.$3,900.$8,400.
Martin Company purchases a machine at the beginning of the year at a cost of $78,000. The machine is depreciated using the straight-line method. The machine’s useful life is estimated to be 5 years with a $4,000 salvage value. The book value of the machine at the end of year 5 is:Multiple Choice$0.$74,000.$14,800.$4,000.$31,200.
A new manufacturing machine is expected to cost $556,000, have an eight-year life, and a $60,000 salvage value. The machine will yield an annual income of $69,916. Annual depreciation expense is $62,000 per year. Compute the accounting rate of return for the investment.
A machine will cost $80,000. It has an expected life of 4 years with an anticipated scrap value of $10,000. Expected net operating cash inflows each year are as follows: Yr1 120,000 Yr2 230,000 Yr3 340,000 Yr4 410,000 Required: Calculate the payback period of the project.
A company purchases a machine for $10,000. The estimated residual value is $4,000, and the estimated service life is 4 years or 10,000 units. The company uses the straight-line method of depreciation. The depreciable cost of the asset is:Multiple Choice$6,000$10,000$1,000$1,500
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.