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# straight-line method of depreciation and financial statements

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A machine with a useful life of 6 years and a residual value of \$3,000 was purchased at the beginning of year 1 for \$30,000. The machine was sold for \$15,000 on April 1 in year 4.

(a) What was the book value of the equipment at the end of year 3 assuming the straight-line method of depreciation is used?

(b) Illustrate the effects on the accounts and financial statements of the depreciation from January 1 to April 1 of year 4.

(c) Illustrate the effects on the accounts and financial statements of the sale of the machine on April 1.

#### Solution Preview

Depreciation Expense Per Year = (30,000 - 3,000)/6 = 4,500

(a)
Book Value at the end of Year 3 = 30,000 - 4,500*3 = 16,500

(b)
Jan 1 through Apr 1 ...

#### Solution Summary

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