{"id":181541,"date":"2025-01-11T02:21:04","date_gmt":"2025-01-11T02:21:04","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=181541"},"modified":"2025-01-11T02:21:06","modified_gmt":"2025-01-11T02:21:06","slug":"a-company-bought-a-new-machine-for-its-warehouse-on-january-1","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/01\/11\/a-company-bought-a-new-machine-for-its-warehouse-on-january-1\/","title":{"rendered":"A company bought a new machine for its warehouse on January 1"},"content":{"rendered":"\n<p>A company bought a new machine for its warehouse on January 1<\/p>\n\n\n\n<p>a. Paid $10,000 in CASH<\/p>\n\n\n\n<p>b. Financed THE REST of the purchase price via a $30,000 5-Year note<\/p>\n\n\n\n<p>c. Incurred a SEPERATE $2,000 setup charge<\/p>\n\n\n\n<p>d. Monthly depreciation is $500 ($6,000 annual).<br>What&#8217;s the book value of the new machine ON December 31?<\/p>\n\n\n\n<p><strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-ast-global-color-6-color\">The correct answer and explanation is:<\/mark><\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Book Value of the New Machine on December 31<\/h3>\n\n\n\n<p><strong>Answer: $34,000<\/strong><\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\">Explanation:<\/h3>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Initial Costs of the Machine<\/strong><br>The total cost of acquiring the machine includes:<ul><li>Purchase Price: $40,000 (Paid $10,000 in cash and financed $30,000 via a note)<\/li><li>Setup Charge: $2,000 (separately incurred and necessary to make the machine operational)<\/li><\/ul><strong>Total Initial Cost:<\/strong> $40,000 + $2,000 = <strong>$42,000<\/strong><\/li>\n\n\n\n<li><strong>Accumulated Depreciation by December 31<\/strong><br>Depreciation reflects the usage or wear-and-tear of the machine over its useful life.<ul><li>Annual Depreciation: $6,000<\/li><li>Monthly Depreciation: $500<\/li><\/ul>For the year ending December 31, the machine has been in use for <strong>12 months<\/strong>:<br>$500 \u00d7 12 = <strong>$6,000<\/strong> <strong>Accumulated Depreciation by Year-End:<\/strong> $6,000<\/li>\n\n\n\n<li><strong>Book Value Calculation<\/strong><br>The book value of an asset is calculated as:<br><strong>Book Value = Initial Cost \u2013 Accumulated Depreciation<\/strong> Substituting the values:<br>Book Value = $42,000 \u2013 $6,000 = <strong>$36,000<\/strong><\/li>\n\n\n\n<li><strong>Understanding Depreciation\u2019s Impact<\/strong>\n<ul class=\"wp-block-list\">\n<li>Depreciation spreads the cost of the machine over its useful life, reducing the book value each year.<\/li>\n\n\n\n<li>Even though the machine&#8217;s functionality remains unchanged, its recorded value decreases due to this accounting treatment.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Key Insights<\/strong>\n<ul class=\"wp-block-list\">\n<li>The cash and financing breakdown ($10,000 cash, $30,000 note) impacts liquidity and liability but not the book value.<\/li>\n\n\n\n<li>The setup cost adds to the machine\u2019s initial cost as it is necessary for operation.<\/li>\n<\/ul>\n<\/li>\n<\/ol>\n\n\n\n<p>Thus, on December 31, the <strong>book value of the machine is $36,000<\/strong>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>A company bought a new machine for its warehouse on January 1 a. Paid $10,000 in CASH b. Financed THE REST of the purchase price via a $30,000 5-Year note c. Incurred a SEPERATE $2,000 setup charge d. Monthly depreciation is $500 ($6,000 annual).What&#8217;s the book value of the new machine ON December 31? The [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-181541","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/181541","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=181541"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/181541\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=181541"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=181541"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=181541"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}