QuestionMay 23, 2025

A machine purchased for 15,000 is expected to last 5 years and have a trade-in value of 6000 What is the book value in year 2 using straight-line depreciation?

A machine purchased for 15,000 is expected to last 5 years and have a trade-in value of 6000 What is the book value in year 2 using straight-line depreciation?
A machine purchased for 15,000 is expected to last 5 years and have a trade-in value of
 6000
What is the book value in year 2 using straight-line depreciation?

Solution
4.4(292 votes)

Answer

11400 Explanation 1. Calculate Annual Depreciation **Annual Depreciation = \frac{\text{Cost} - \text{Trade-in Value}}{\text{Lifespan}}**. Here, it is \frac{15000 - 6000}{5} = 1800. 2. Calculate Total Depreciation by Year 2 Multiply the annual depreciation by 2: 1800 \times 2 = 3600. 3. Calculate Book Value in Year 2 Subtract total depreciation from initial cost: 15000 - 3600 = 11400.

Explanation

1. Calculate Annual Depreciation<br /> **Annual Depreciation = \frac{\text{Cost} - \text{Trade-in Value}}{\text{Lifespan}}**. Here, it is $\frac{15000 - 6000}{5} = 1800$.<br /><br />2. Calculate Total Depreciation by Year 2<br /> Multiply the annual depreciation by 2: $1800 \times 2 = 3600$.<br /><br />3. Calculate Book Value in Year 2<br /> Subtract total depreciation from initial cost: $15000 - 3600 = 11400$.
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