Marvin\'s Machines purchases Equipment with a Cost of $80,000.00 on Jan 1, 2008.
ID: 2481040 • Letter: M
Question
Marvin's Machines purchases Equipment with a Cost of $80,000.00 on Jan 1, 2008. They paid delivery costs of $2500 and Installation Costs of $1,000.00. The Equipment has $2,000.00 Salvage value and a 4 Year useful life. During 2008 Devin paid $1,000.00 in additional maintenance and repair costs.
a. Prepare and record the annual Depreciation Using Straight-Line Depreciation Method for 2008?
b. What is the Carrying Value or Book Value of the Equipment on December 31, 2010?
Can someone please help me answer this accounting question?
Explanation / Answer
Cost of Asset=Purchase Price+delivery cost+Installation charges
=$80,000+$2,500+$1000
=$83,500
Depreciation = (Cost - Residual value) / Useful life
=$83,500-$2,000/4
Year
Value at the beginning of year
Depreciation
Accumulated dep
End book Value(cost-dep)
2008
$83500
$20375
$20375
$63125
2009
$63125
$20375
$40750
$42750
2010
$42750
$20375
$61125
$22375
**Repair and maintenance cost of $1000 wil not be considered as it is general maintainance and will be charged to P/L /C.
So,
Annual Depreciation for year 2008 is $ 20375.
Book value on 31.12.2010 is 22,375.
Year
Value at the beginning of year
Depreciation
Accumulated dep
End book Value(cost-dep)
2008
$83500
$20375
$20375
$63125
2009
$63125
$20375
$40750
$42750
2010
$42750
$20375
$61125
$22375
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