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Pearson Company bought a machine on January 1, 2014. The machine cost $144,000 and had an expected salvage value of $24,000. The life of the machine was estimated to be 5 years. The book value of the machine at the beginning of the third year would be
a. $144,000.
b. $120,000.
c. $96,000.
d. $48,000.

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Answer:

Book value= $96,000

Explanation:

Giving the following information:

Pearson Company bought a machine on January 1, 2014. The machine cost $144,000 and had an expected salvage value of $24,000. The life of the machine was estimated to be 5 years.

Annual depreciation= (original cost - salvage value)/estimated life (years)

Straight-line depreciation= (144,000 - 24,000)/5= 24,000

Accumulated depreciation= 24,000*2= 48,000

Book value= 144,000 - 48,000= 96,000

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