On January, 1, Year One, Richards Ice Cream Shoppe acquired a new machine which will make their popular product faster and creamier. Mary, the owner, spent $10,000 on the machine. Mary also paid $500 to ship the equipment, $350 to install, $750 to train employees, and $1,000 to market their improved product to customers. The machine is estimated to have an 8-year useful life and a salvage value of $1,000. Mary uses straight-line depreciation. The historical cost of the asset recorded on the books is: Question 2 The depreciable base of the asset is: . Question 3 The depreciation expense to be recorded in Year 1 is: . Question 4 The depreciation expense to be recorded in Year 4 is: . Question 5 The net book value of the asset at the end of Year 1 is: . Question 6 The net book value of the asset at the end of Year 4 is
On January, 1, Year One, Richards Ice Cream Shoppe acquired a new machine which will make their popular product faster and creamier. Mary, the owner, spent $10,000 on the machine. Mary also paid $500 to ship the equipment, $350 to install, $750 to train employees, and $1,000 to market their improved product to customers. The machine is estimated to have an 8-year useful life and a salvage value of $1,000. Mary uses straight-line depreciation. The historical cost of the asset recorded on the books is: Question 2 The
Cost of the machine-
| Particulars | Amount ($) |
| Purchase cost | 10000 |
| Shipment Cost | 500 |
| Installation Cost | 350 |
| Total Cost | 10850 |
Depreciation of the machine-
Cost of the machine= $10850
Salvage Value= $1000
Useful Life= 8 years
Depreciation under straight line method=
=
= $1231.25 or $1231 (approx.)
Depreciation to be charged at the end of 4 year= $1231
Net Book Value of the asset at the end of year 1= $10850 - $1231 = $9619
| Year | Amount ($) | Depreciation Amount ($) | Net Amount ($) |
| 1 | 10850 | 1231 | 9619 |
| 2 | 9619 | 1231 | 8388 |
| 3 | 8388 | 1231 | 7157 |
| 4 | 7157 | 1231 | 5926 |
Net Book Value of the asset at the end of year 4= $7157 - $1231 = $5926
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