On January 1, 2016, Martini, Inc. acquired a machine for $1,030,000. The estimated useful life of the asset is five years. Residual value at the end of five years is estimated to be $87,000. What is the book value of the machine at the end of 2017 if the company uses the straight-line method of depreciation?

Answer: $652,800

Explanation:

Straight Line Depreciation per year = (Cost - Residual Value) / Useful Life

Straight Line Depreciation per year = ($1,030,000 - $87,000) / 5

Straight Line Depreciation per year = $188,600

Accumulated Depreciation at the end of 2017 = Depreciation per year * No. of years used

Accumulated Depreciation at the end of 2017 = $188,600 * 2

Accumulated Depreciation at the end of 2017 = $377,200

Book Value at the end of 2017 = Cost - Accumulated Depreciation at the end of 2017

Book Value at the end of 2017 = $1,030,000 - $377,200

Book Value at the end of 2017 = $652,800