Kansas Enterprises purchased equipment for $60,000 on January 1,2018.The equipment is expected to have a five-year life,with a residual value of $5,000 at the end of five years.Using the straight-line method,the book value at December 31,2018 would be:

Question

Quizplus · Accepted Answer

To calculate the annual depreciation using straight-line method, we use the following formula:

Annual Depreciation = (Cost of Asset - Residual Value) / Useful Life

Annual Depreciation = ($60,000 - $5,000) / 5 = $11,000

Therefore, the book value at December 31, 2018 would be:

Book Value = Cost of Asset - Accumulated Depreciation

Book Value = $60,000 - ($11,000 * 1) = $49,000

Kansas Enterprises Purchased Equipment for $60,000 on January 1,2018