Do-Good Inc. is a newly formed not-for-profit organization. On January 1, 2012, its first day of operations, Do-Good purchased equipment costing $8,000. The equipment is estimated to have a useful life of 4 years, with no residual value at that time. This transaction was the only transaction that took place to date. The equipment was purchased from a restricted fund contribution of $8,400. What would be the carrying value of the equipment on December 31, 2012?

Question

Quizplus · Accepted Answer

The carrying value of the equipment is calculated by subtracting the accumulated depreciation from the cost of the equipment. The equipment cost $8,000 and has a useful life of 4 years, so the annual depreciation is $8,000 / 4 = $2,000. Therefore, the carrying value on December 31, 2012, is $8,000 - $2,000 = $6,000.