Equipment was purchased for $17,000 on January 1, 2010. Freight charges amounted to $700 and there was a cost of $2,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $3,000 salvage value at the end of its 5-year useful life. What is the amount of accumulated depreciation at December 31, 2011, if the straight-line method of depreciation is used?

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The total cost of the equipment is $19,700 ($17,000 + $700 + $2,000). The depreciable amount is $16,700 ($19,700 - $3,000 salvage value). The annual depreciation is $3,340 ($16,700 / 5 years). After 2 years, accumulated depreciation is $6,680 ($3,340 x 2).

Equipment Was Purchased for $17,000 on January 1, 2010