Company Omega bought new petroleum refining equipment in the year 2000. The purc

Question

Company Omega bought new petroleum refining equipment in the year 2000. The purchase cost was 131880 dollars and in addition it had to spend 13929 dollars for installation. The refining equipment has been in use since February 1st, 2000. Omega forecasted that in 2030 the equipment would have a net salvage value of $10,000. Using the US Straight Line Depreciation Schedule, estimate the value of depreciation recorded in the accounting books in the year 2004 if the company decided to sell the equipment on August 5th (of 2004).

Explanation / Answer

Depreciation per year : (131880+13929-10000)/30=4527; Depreciation for 4 and half years : 4.5*4527=$20371;Machine selling price would be:131880+13929-10000-20371=115438;; Net depreciation recorded in the accounting books in the year 2004 :4527*8/12=$3018 ( Because Omeaga used machine for 8 months only in 2004) .

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