(Ignore income taxes in this problem.) The Baker Company purchased a piece of equipment with the following expected results: The initial cost of the equipment was:

Question

(Ignore income taxes in this problem.) The Baker Company purchased a piece of equipment with the following expected results:  The initial cost of the equipment was:

Quizplus · Accepted Answer

From the provided information, the initial cost of the equipment can be computed as follows:

Initial Cost = Salvage Value + Total Depreciation
Total Depreciation = (Annual Depreciation Expense) x (Number of Years)
Annual Depreciation Expense = (Initial Cost - Salvage Value) / (Number of Years)
$70,000 = ($250,000 - $50,000) / 5
$70,000 = $40,000

Therefore,

Initial Cost = $250,000 + $40,000
Initial Cost = $290,000

Thus, the best choice is B) $180,250, which is not included in the answer choices. However, since the question states that the initial cost cannot be determined from the given information, we cannot choose any of the answer choices as the correct answer.

(Ignore Income Taxes in This Problem