On Nov 2 2020 MG Company purchased equipment with $50000 cash.The equipment has an estimated salvage value of $8000 an estimated life of 7 years and is depreciated by the straight-line method.Use the following tabular analysis to determine the book value of the equipment at December 31 2022.

Question

Quizplus · Accepted Answer

The annual straight-line depreciation expense can be calculated as follows:
Depreciation Expense= (Cost - Salvage Value) / Useful Life
Depreciation Expense= ($50,000 - $8,000) / 7 = $6,571.43 per year

To determine the book value of the equipment at December 31 2022, we need to calculate the accumulated depreciation up to that date. The equipment was purchased on Nov 2, 2020, so the accumulated depreciation for 2020 will be zero. For the year 2021 and 2022, the accumulated depreciation can be calculated as follows:

Accumulated Depreciation as of December 31, 2021= $6,571.43 × 1 year = $6,571.43
Book Value as of December 31, 2021= $50,000 - $6,571.43 = $43,428.57

Accumulated Depreciation as of December 31, 2022= $6,571.43 × 2 years = $13,142.86
Book Value as of December 31, 2022= $50,000 - $13,142.86 = $36,857.14

Therefore, the book value of the equipment at December 31, 2022 is $37,000 (option C).

On Nov 2 2020 MG Company Purchased Equipment with $50000