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It can be noted that the book value of the machinery by December 31 is $36000.
From the complete information, the purchase price of the machinery will be:
= $10000 + $2000 + $30000
= $42000
Annual depreciation will be;
= $500 × $12
= $6000
Therefore, the book value will be:
= $42000 - $6000
= $36000
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The book value of the new machine on December 31 of the first year is $45,000.
The book value of an asset is the purchase cost less the accumulated depreciation.
Assume that the asset was purchased for $50,000 on January 1, and depreciation is at 10% per year.
Data and Calculations:
Cost of asset = $50,000
Depreciation rate = 10%
Depreciation expense = $5,000 ($50,000 x 10%)
Book value on December 31 = $45,000 ($50,000 - $5,000)
Thus, the book value of the new machine on December 31 of the first year is $45,000.
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