Sargent Corporation bought equipment on January 1, 2015. The equipment cost $360,000 and had an expected salvage value of $60,000. The life of the equipment was estimated to be 6 years. Assuming straight-line deprecation, the book value of the equipment at the beginning of the third year would be

Question

Quizplus · Accepted Answer

The annual depreciation expense is calculated as:

Depreciation expense = (Cost - Salvage value) / useful life

= ($360,000 - $60,000) / 6

= $50,000

Therefore, the accumulated depreciation at the beginning of the third year would be:

Accumulated depreciation = 2 years x $50,000/year

= $100,000

The book value of the equipment at the beginning of the third year would be:

Book value = Cost - Accumulated depreciation

= $360,000 - $100,000

= $260,000

Sargent Corporation Bought Equipment on January 1, 2015