On January 1, 2016, equipment was purchased for $100,000. The equipment's estimated residual value is $20,000, and its estimated useful life is 8 years. On December 31, 2016, the book value using the straight-line method of depreciation is $90,000.

Question

Quizplus · Accepted Answer

The straight-line depreciation method calculates annual depreciation by subtracting the residual value from the cost and dividing by the useful life. For this equipment, annual depreciation is ($100,000 - $20,000) / 8 = $10,000. Therefore, the book value at the end of 2016 is $100,000 - $10,000 = $90,000.

On January 1, 2016, Equipment Was Purchased for $100,000