Pearson Company bought a machine on January 1, 2014. The machine cost $144,000 and had an expected salvage value of $24,000. The life of the machine was estimated to be 5 years. The book value of the machine at the beginning of the third year would be
A) $144,000.
B) $120,000.
C) $96,000.
D) $48,000.

Question

Quizplus · Accepted Answer

The machine depreciates by ($144,000 - $24,000) / 5 = $24,000 per year. After two years, the accumulated depreciation is $48,000, so the book value at the beginning of the third year is $144,000 - $48,000 = $96,000.

Pearson Company Bought a Machine on January 1, 2014