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 residual 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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Quizplus · Accepted Answer

The total cost of the equipment is $17,000 + $700 + $2,000 = $19,700. The depreciable amount is $19,700 - $3,000 = $16,700. Using the straight-line method over 5 years, annual depreciation is $16,700 / 5 = $3,340. By December 31, 2011, two years of depreciation have occurred, so accumulated depreciation is 2 * $3,340 = $6,680.

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