Question

What would the book value be at the end of year 6 for a piece of equipment using the straight-line method when cost is $11,000, residual value is $1,000, and the expected life is 10 years?

Answer 1

Cost of equipment = $11,000

Residual value = $1,000

Expected useful life = 10 years

Annual depreciation expense = (Cost of equipment- Residual value)/Expected useful life

= (11,000-1,000)/10

= 10,000/10

= $1,000

Accumulated depreciation at the end of 6 year = Annual depreciation expense x 6

= 1,000 x 6

= $6,000

Book value of equipment at the end of 6 year = Cost of equipment- Accumulated depreciation at the end of 6 yea

= 10,000-6,000

= $4,000

The book value be at the end of year 6 for a piece of equipment = $4,000