Question

Kansas enterprises purchased equipment for 74k on January 1, 2024. The equipment is expected to have a five-year service life, with a residual value of 7950 at the end of five years. What is the cost of the equipment after five years?

1) 68,050
2) 68,150
3) 68,250
4) 68,350

Answer 1

The cost of the equipment after five years is $68,050 option 1.

Step-by-step explanation:

The cost of the equipment after five years can be calculated using the straight-line depreciation method. The annual depreciation expense is calculated by subtracting the residual value from the purchase price and dividing it by the expected service life. In this case, the annual depreciation expense is ($74,000 - $7,950) / 5 = $13,610. After five years, the total depreciation expense would be $13,610 * 5 = $68,050. Therefore, the cost of the equipment after five years is $68,050 option 1.