Espanola Co. purchases equipment with a cost of $25,000 and a trade-in value of $4,000. Espanola Co. estimates that the equipment will have a useful life of 7 years. Assuming Espanola Co. has depreciated the equipment for a total of 4 years using the straight-line method, what is the book value of the equipment?
A) $12,000
B) $13,000
C) $8,000
D) None of the answers listed

Question

Quizplus · Accepted Answer

The annual depreciation is ($25,000 - $4,000) / 7 = $3,000. After 4 years, total depreciation is 4 * $3,000 = $12,000. The book value is $25,000 - $12,000 = $13,000.