Question

Use these facts for the following independent situations. Steele Inc. purchased a machine for $500,000 on January 1, Year1. The machine has a $20,000 residual value and an estimated life of 20 years. The machine is expected to produce 1,000,000 widgets over its life. Steele prepares annual financial statements at 12/31 each year. What is the 'depreciable cost' of the machine

Answer 1

the depreciable cost' of the machine is $480,000

Step-by-step explanation:

The computation of the 'depreciable cost' of the machine is shown below:

Depreciable cost = Asset cost- Salvage value

= $500,000 - $20,000

= $480,000

Hence, the depreciable cost' of the machine is $480,000

We simply deduct the salvage value from the asset cost so that the depreciable cost could come