Mitchell Corporation bought equipment on January 1, 2017. The equipment cost $300,000 and had an expected salvage value of $50,000. The life of the equipment was estimated to be 6 years. The book value of the equipment at the beginning of the third year would be
A)$300,000.
B)$250,000.
C)$216,666.
D)$83,333.

Question

Quizplus · Accepted Answer

To find the book value of the equipment at the beginning of the third year, we need to calculate the depreciation expense for the first two years.

Depreciation expense per year = (Cost - Salvage value) / Life
Depreciation expense per year = ($300,000 - $50,000) / 6 = $41,667

Total depreciation expense for two years = $41,667 x 2 = $83,334

Book value of equipment at the beginning of the third year = Cost - Accumulated depreciation
Book value of equipment at the beginning of the third year = $300,000 - $83,334 = $216,666

Therefore, the answer is C) $216,666.

Mitchell Corporation Bought Equipment on January 1, 2017