Question

Mohr Company purchases a machine at the beginning of the year at a cost of $29,000. 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:

• $13,200.

• $8,800.

• $22,000.

• $20,200.

• $4,400.

Answer 1

Correct answer-----------$20,200

Working

Straight line Method
A	Cost	$ 29,000
B	Residual Value	$ 7,000
C=A - B	Depreciable base	$ 22,000
D	Life [in years left ]	5
E=C/D	Annual SLM depreciation	$               4,400.00

.

Depreciation schedule-Straight line method
Year	Book Value	Depreciation expense	Accumulated Depreciation	Ending Book Value
1	$          29,000.00	$               4,400.00	$                4,400.00	$              24,600.00
2	$          24,600.00	$               4,400.00	$                8,800.00	$              20,200.00