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Norwood, Inc. purchased a crane at a cost of $80,000. The crane has an estimated residual value of $5,000 and an estimated life of eight years, or 12,500 hours of operation. The crane was purchased on January 1, 2017, and was used 2,700 hours in 2017 and 2,600 hours in 2018. Refer to the information for Norwood, Inc. If Norwood uses the straight-line depreciation method, what is the book value at December 31, 2019

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Answer:

Book value= $51,875

Explanation:

Giving the following information:

Purchase price= $80,000

Salvage value= $5,000

Useful life= 8 years

First, we need to calculate the annual depreciation under the straight-line method:

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

Annual depreciation= (80,000 - 5,000) / 8

Annual depreciation= $9,375

Now, we can determine the book value at the end of 2019:

Book value= purchase price - accumulated depreciation

Book value= 80,000 - (9,375*3)

Book value= $51,875

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