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Calculating Book Value of the Machine

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Roberts Company purchased a machine in January 2003 for $200,000. When originally purchased, the machine had an estimated useful life of five years and an estimated residual value of $30,000. The company uses straight-line depreciation. It is now June 30, 2006, and the company has decided to dispose of the machine.

Calculate the book value of the machine as of June 30, 2006, calculate the gain or loss on the sale of the machine assuming Roberts sells it for $102,000, and calculate the gain or loss on the sale of the machine assuming Roberts sells it for $25,000.

Calculation of Depreciation under Straight line method
Cost of Machine $200,000
Less: Estimated residual Value $30,000
Depreciable cost $170,000
Estimated life 5 years

Annual Depreciation= Cost-Est residual value
Estimated life in years
Annual depreciation= (200000-30000)
5
Annual depreciation= $34,000
Depreciation for 2006 for 6 months
$34000/2 $17,000

Gain or Loss on sale of Machine assuming Rober sells it For $102000
Cost of machine on 1st January 2003 $200,000
Less: Depreciation 2003 $34,000
2004 $34,000
2005 $34,000
2006 $17,000
$119,000
Book Value on June 30, 2006 $81,000
Sale Price $102,000
Gain on SaleP/L On sale $21,000

Gain or Loss on sale of Machine assuming Rober sells it For $25000
Cost of machine on 1st January 2003 $200,000
Less: Depreciation 2003 $34,000
2004 $34,000
2005 $34,000
2006 $17,000
$119,000
Book Value on June 30, 2006 $81,000
Sale Price $25,000
Loss on SaleP/L On sale ($56,000)

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Solution Summary

This solution helps calculate the book value of a machine. The straight line method for depreciation under is given.

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