Accounting basic

Question

A company purchases equipment for $197,500 on January 1. It has an estimed residual value of $7,600 and an estimated useful life of 9 years. The company uses the straight-line method of depreciation. Determine the book value of the equipment after 11 years of ownership.

Answer 1

After 9 years the equipment would be carried at residual value. All cost would have been assigned to the first 9 years.

Value in year 11

Equipment                       Db $197,500
Accumulated Depreciation                     Cr 189900

Net book value $7,600