The following information applies to the questions displeyed below) of delivery,

Question

The following information applies to the questions displeyed below) of delivery, January 2, the company paid $6,000 on the machine, with the belance on oredit at 10 percen interest due in six months. On January 3.« paid SLOOfor feigt on the machine. On January 5, Ashkar paid nstalation costsvetng ino one noure-i, nson On hlyt on the machine phus the interest. On December 31 (the end of the accounting period, Ashkar recorded depreciation on the machine uing the stigh ine method with aneated usele of 10 years and an estimated residual value of $4,000

Explanation / Answer

Acquisition cost=cash paid + notes payable+freight cost+installation cost

=$6,000+$15,000+$1,000+$2,500

=$24,500

3.

Depreciation expense=($24,500-4,000)/10

=$2,050

4.

Net book value at the end of year 2:

=Acquiring cost - depreciation for 2 years

=$24,500-$4100

=$20,400

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