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A $335
A $335.885 Bentley Mulsanne has an anticipated $80,000 salvage value at the end of its five-year depreciation life. What is the book value of the Bentley at the end of year 2 using straight line depreciation?
Expert Solution
Cost = $335,885
Salvage value = $80,000
Useful life of the machine = 5 years
Depreciation = ( Cost - Salvage value } / Useful life
= { 335,885 - 80,000 } / 5
= 255,885 / 5
= $ 51,177
So depreciation expense is $ 51,177 for 5 years.
Now lets see what happens on the balanced sheet,
For 1 year = 335,885 - 51,177 = $284,708
For 2 year = 284,708 - 51,177 = $233,531
Thus the closing balance for year 2 is $233,531
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