machine for $86,000 its estimated life is 10 years with a residual value of $6,000 Using the striaght line method , what is the book value of the machine at the end of year 2?

Question

A painting company bought a machine for $86,000. its estimated life is 10 years with a residual value of $6,000. Using the straight line method , what is the book value of the machine at the end of year 2?

Answer 1

The machine depreciates 86000-6000=80000 in 10 years, so that’s a linear rate of $8000 a year.

In two years the depreciation amount is $16000 making the value after 2 years 86000-16000=$70000.