A company purchased equipment valued at $200,000 on January 1.The equipment has an estimated useful life of six years or five million units.The equipment is estimated to have a salvage value of $13,400.Assuming the straight-line method of depreciation,what is the book value at the end of the second year if 1.5 million units were produced?

Question

Quizplus · Accepted Answer

The straight-line depreciation method calculates annual depreciation as (Cost - Salvage Value) / Useful Life. For this equipment: ($200,000 - $13,400) / 6 = $31,100 per year. After two years, total depreciation is $31,100 * 2 = $62,200. The book value at the end of the second year is $200,000 - $62,200 = $137,800.

A Company Purchased Equipment Valued at $200,000 on January 1