On January 1,2011,Swinger,Inc.purchases a batting machine for $240,000 that has an estimated useful life of 5 years and an expected residual value of $20,000.Calculate the book value of the equipment that will be reported on the balance sheet dated December 31,2012.

Question

Quizplus · Accepted Answer

The annual depreciation expense can be calculated using the following formula:
Depreciation Expense = (Cost - Residual Value) / Useful Life
Depreciation Expense = ($240,000 - $20,000) / 5 = $44,000 per year

To calculate the book value of the equipment on December 31, 2012, we need to subtract the accumulated depreciation from the original cost:
Accumulated Depreciation = Depreciation Expense x Number of Years
Accumulated Depreciation = $44,000 x 2 = $88,000

Book Value = Cost - Accumulated Depreciation
Book Value = $240,000 - $88,000 = $152,000

Therefore, the correct answer is D.