A machine is purchased for $120 000.It is estimated that it has a useful life of 4 years and will then be sold for $8000.Using the straight-line method the carrying value of the machine at the end of the third year of the machine's useful life is:
A)$28 000
B)$42 000
C)$36 000
D)$60 000

Question

Quizplus · Accepted Answer

The straight-line method of depreciation indicates that every year the same amount of depreciation expense will be recognized. 
Therefore, the annual depreciation expense for this machine will be (Cost - Salvage Value) / Useful Life = ($120,000 - $8,000) / 4 = $28,000 per year.
After 3 years, the cumulative depreciation will be $28,000 x 3 = $84,000, which means the carrying value of the machine at the end of the 3rd year will be $120,000 - $84,000 = $36,000, which is option C.

A Machine Is Purchased for $120 000