Solve the problem.
-Tech Support Associates purchased a new computer network server and replaced all its terminals
For $29,600. Its estimated life is 4 years, at which time it will have a scrap value of $2,100. Use the
Straight-line method of depreciation to find the annual amount of depreciation. Find the book
Value at the end of 3 years.

Question

Quizplus · Accepted Answer

The straight-line method of depreciation means subtracting the scrap value from the purchase price and then dividing that by the number of years of useful life.

Annual Depreciation = (Purchase price - Scrap Value) / Useful Life
Annual Depreciation = (29600 - 2100) / 4
Annual Depreciation = $6,875

To find the book value at the end of 3 years, we can use the formula:

Book Value = Purchase Price - Accumulated Depreciation

Accumulated Depreciation = Annual Depreciation x Number of Years
Accumulated Depreciation = $6,875 x 3
Accumulated Depreciation = $20,625

Book Value = $29,600 - $20,625
Book Value = $8,975

Therefore, the correct choice is C) $6,875, $8,975. To calculate the annual amount of depreciation using straight-line method:

- Subtract the scrap value from the initial cost: $29,600 - $2,100 = $27,500
- Divide this value by the estimated life: $27,500 / 4 = $6,875 per year

To find the book value at the end of 3 years:

- Multiply the annual depreciation by the number of years: $6,875 * 3 = $20,625
- Subtract this value from the initial cost: $29,600 - $20,625 = $8,975

Therefore, the correct answer is C) $6,875, $8,975.

Solve the Problem. -Tech Support Associates Purchased a New Computer Network Server and Network