Sargent Corporation bought equipment on January 1, 2018. 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

To calculate the annual depreciation, we need to subtract the salvage value from the cost and divide by the number of years of useful life:

($360,000 - $60,000) / 6 years = $50,000 per year

After two years, the accumulated depreciation would be:

$50,000/year x 2 years = $100,000

So, the book value at the beginning of the third year would be:

$360,000 - $100,000 = $260,000 (choice C).

Sargent Corporation Bought Equipment on January 1, 2018