Gulf Consulting Co. reported the following on its December 31, 2018, balance sheet: Equipment (at cost) $700,000
In a disclosure note, Gulf indicates that it uses straight-line depreciation over five years and estimates salvage value as 10% of cost. Gulf's equipment averages 3.5 years at December 31, 2018. What is the book value of Gulf's equipment at December 31, 2018?
A) $490,000.
B) $441,000.
C) $259,000.
D) $210,000.

Question

Quizplus · Accepted Answer

Annual depreciation is ($700,000 - 70,000) ÷ 5 = $126,000
Depreciation for 3.5 years is $126,000 × 3.5 = $441,000
Book value = $700,000 - 441,000 = $259,000