A company purchased equipment at the beginning of 2013 for $21,000 and decided to depreciate it over a 5-year period using the straight-line method. The equipment's residual value was estimated at $1,000. The estimated fair market value at the end of 2013 was $20,000. Which of the following statements is correct at December 31, 2013?

Question

Quizplus · Accepted Answer

Using the straight-line method, the annual depreciation expense would be ( $21,000 - $1,000 ) / 5 years = $4,000 per year.
At December 31, 2013, the equipment would have been depreciated for one year, therefore, the accumulated depreciation would be $4,000.
The book value of the equipment at December 31, 2013, would be $21,000 - $4,000 = $17,000. 
Therefore, the correct statement is that the book value of the equipment is $17,000 (option B).

A Company Purchased Equipment at the Beginning of 2013 for $21,000