Explore BrainMass

Explore BrainMass

    Calculating Book Value of the Machine

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    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)

    © BrainMass Inc. brainmass.com June 4, 2020, 2:18 am ad1c9bdddf
    https://brainmass.com/business/accounting/calculating-book-value-machine-450922

    Solution Preview

    Solution is provided in a separate excel file attached. It contains ...

    Solution Summary

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

    $2.19

    ADVERTISEMENT