Sara's Designs purchased equipment at the beginning of 2015 for $11,000. Sara decided to depreciate the equipment over a 5-year period using the straight-line method. Sara estimated the equipment's residual value at $1,000. The estimated fair market value at the end of 2015 was $10,000. Which of the following statements is
Correct concerning Sara's financial statements at December 31, 2015?

Question

Quizplus · Accepted Answer

The book value of the equipment is calculated as the cost minus accumulated depreciation. The annual depreciation is ($11,000 - $1,000) / 5 = $2,000. Therefore, the book value at the end of 2015 is $11,000 - $2,000 = $9,000.

Sara's Designs Purchased Equipment at the Beginning of 2015 for $11,000