Question

A piece of equipment costs $300,000 and has $60,000 of depreciation expense each year using the straight-line method. What is the book value at the end of the third year?

Answer 1

$120,000

Step-by-step explanation:

Value at year end = Book value - Depreciation for the year.

Provided cost of equipment = $300,000

Depreciation per year = $60,000 on straight line.

Under straight line method the depreciation is fixed for each year, and hence such depreciation need not be calculated again and again.

Therefore, value at third year end = Cost - Depreciation
`*` 3 =

$300,000 - ($60,000
`*` 3) = $300,000 - $180,000 = $120,000