Mitchell Corporation bought equipment on January 1, 2014. The equipment cost $180,000 and had an expected salvage value of $30,000. 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) $180,000.
B) $150,000.
C) $130,000.
D) $50,000.

Question

Quizplus · Accepted Answer

The equipment depreciates by $25,000 per year (($180,000 - $30,000) / 6 years). After two years, the accumulated depreciation is $50,000, so the book value at the beginning of the third year is $130,000 ($180,000 - $50,000).

Mitchell Corporation Bought Equipment on January 1, 2014