Financial Reporting and Analysis Q93

0. Lavish Leathers Ltd. purchased a machine worth $100,000. The machine will be used for five years. The estimated salvage value at the end of Year 5 is $15,000. The company charges depreciation using the straight line method. Which of the following is most likely to be the net book value of the machine at the end of Year 3?

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Option : C
Explanation : Depreciation Expense = Purchase price - Residual Value / Life of Asset = (100,000 - 15,000) / 5 = 17,000 Balance of machine after three years = 100000 - (17000 * 3) = $49,000.

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