Alladin Company purchased Machine #201 on May 1, 2014. The following information relating to Machine #201 was

Question:

Alladin Company purchased Machine #201 on May 1, 2014. The following information relating to Machine #201 was gathered at the end of May.

Price ..................................................................... $ 85,000

Credit terms ............................................................. 2/10, n/30

Freight-in ............................................................... $ 800

Preparation and installation costs ...................................... $ 3,800

Labor costs during regular production operations .................... $ 10,500

It is expected that the machine could be used for 10 years, after which the salvage value would be zero. Alladin intends to use the machine for only 8 years, however, after which it expects to be able to sell it for $1,500. The invoice for Machine #201 was paid May 5, 2014. Alladin uses the calendar year as the basis for the preparation of financial statements?

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...