Eastern Fisheries Co. purchased equipment on January 1, 20X1 for $22,500. The equipment had an estimated useful life of 10 years and an estimated residual value of $2,500. The company uses double-declining-balance depreciation.

-Assuming Eastern uses straight-line depreciation, what would be the book value of the machine ten years later, on December 31

Question

-Assuming Eastern uses straight-line depreciation, what would be the book value of the machine ten years later, on December 31

Quizplus · Accepted Answer

The straight-line depreciation method spreads the cost of the asset evenly over its useful life. The annual depreciation expense is calculated as (Cost - Residual Value) / Useful Life. For this equipment, it's ($22,500 - $2,500) / 10 = $2,000 per year. Over 10 years, the total depreciation would be $20,000, leaving a book value of $2,500 ($22,500 - $20,000).