Question

8. A machine was purchased for $1,00,000 on 1st January 2018. This is expected to last for 5 years. Its estimated scrap value at the end of 5 years is *20,000.​

Answer 1

$16000

Explanation:

The straight line depreciation for the machine would be calculated as follows:

• Cost of the asset: $100,000
• Cost of the asset – Estimated salvage value: $100,000 – $20,000 = $80,000 total depreciable cost
• Useful life of the asset: 5 years
• Divide step (2) by step (3): $80,000 / 5 years = $16,000 annual depreciation amount

Therefore, Company A would depreciate the machine at the amount of $16,000 annually for 5 years.