Sargent Corporation bought equipment on January 1, 2014. The equipment cost €360,000 and had an expected residual value of €60,000. The life of the equipment was estimated to be 6 years. The book value of the equipment at the beginning of the third year would be

Question

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The equipment has a cost of €360,000 and a residual value of €60,000. This means that the total depreciation over its estimated useful life of 6 years is €360,000 - €60,000 = €300,000.

To find the book value at the beginning of the third year, we need to know the total depreciation taken until that point. Since the life of the equipment is 6 years and we want to know the book value at the beginning of the third year, we know that 2 years of depreciation have been taken.

Depreciation per year = (cost - residual value) / useful life = (€360,000 - €60,000) / 6 years = €50,000 per year

Total depreciation taken after 2 years = 2 years * €50,000 per year = €100,000

Therefore, the book value at the beginning of the third year is:

Book value = Cost - Depreciation taken = €360,000 - €100,000 = €260,000

Therefore, the answer is C) €260,000.

Sargent Corporation Bought Equipment on January 1, 2014