Biglersville Corp.purchased equipment at the beginning of 2017 for $16,000.Biglersville Corp.decided to depreciate the equipment over a five-year period using the straight-line method.Biglersville Corp.estimated the equipment's residual value at $1,000.The estimated fair market value at the end of 2017 was $15,000.Which of the following statements is correct concerning Biglersville Corp.'s financial statements at December 31,2017?

Question

Quizplus · Accepted Answer

Based on the information given, the equipment was purchased for $16,000, has an estimated residual value of $1,000, and is being depreciated over a five-year period using the straight-line method. Therefore, the annual depreciation expense would be ($16,000 - $1,000)/5 years = $3,000 per year. At the end of the first year (December 31, 2017), the accumulated depreciation would be $3,000.

So, the book value of the equipment would be $16,000 - $3,000 = $13,000. Therefore, choice B is correct. Choice A is incorrect because the book value is not $30,000. Choice C is incorrect because the total accumulated depreciation is $3,000, not $1,000. Choice D is incorrect because the equipment will be reported on the balance sheet at its book (or carrying) value of $13,000, not its fair market value of $15,000 since the estimated fair market value is not less than the book value.