Sargent Corporation bought equipment on January 1 2017. The equipment cost $360000 and had an expected salvage value of $60000. 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 straight-line depreciation method allocates an equal amount of depreciation expense to each year of the asset's life. To calculate straight-line depreciation expense, subtract the expected salvage value from the cost of the equipment and divide by the expected life of the equipment:

Depreciation expense per year = (Cost - Salvage Value) / Life
Depreciation expense per year = ($360,000 - $60,000) / 6
Depreciation expense per year = $50,000

To find the book value at the beginning of the third year, we need to subtract two years of depreciation:

Book value at beginning of Year 3 = Cost - Accumulated Depreciation
Book value at beginning of Year 3 = $360,000 - ($50,000 * 2)
Book value at beginning of Year 3 = $260,000

Therefore, the correct answer is C) $260,000.

Sargent Corporation Bought Equipment on January 1 2017