Question

Viva Company bought machine X for $18,000 two years ago. The machine had no residual value and had an estimated useful life of 10 years. If the company uses the straight-line depreciation method, calculate the current book value of the machine.

Answer 1

Answer:

The current book value of the machine: $14,400

Explanation:

Viva Company uses straight-line depreciation method, Depreciation Expense each year is calculated by following formula:  

Annual Depreciation Expense = (Cost of machine − Residual Value )/Useful Life = ($18,000 - $0)/10 = $1,800

Depreciation Expense for year 1 = Depreciation Expense for year 2 = $1,800

Accumulated depreciation at the end of year 2 = $1,800 + $1,800 = $3,600

The current book value of the machine = Cost of the machine - Accumulated depreciation at the end of year 2 = $18,000 - $3,600 = $14,400