Question

Equipment acquired at a cost of $83,000 has an estimated residual value of $5,000 and an estimated useful life of 10 years. It was placed in service on April 1 of the current fiscal year, which ends on December 31. When required, round your answers to two decimal places.

a. Calculate the annual straight-line depreciation.
b. Determine the book value of the equipment at the end of the fiscal year.

Answer 1

The annual straight-line depreciation for the equipment is $7,800. The book value of the equipment at the end of the fiscal year is $77,150.

Step-by-step explanation:

a. To calculate the annual straight-line depreciation, we need to subtract the estimated residual value from the initial cost and then divide that by the estimated useful life. In this case, the annual depreciation would be ($83,000 - $5,000) / 10 = $7,800.

b. To determine the book value of the equipment at the end of the fiscal year, we need to subtract the accumulated depreciation from the initial cost. Since the equipment was placed in service on April 1, we need to calculate the depreciation for 9 months. The accumulated depreciation would be ($7,800 / 12) * 9 = $5,850. Therefore, the book value at the end of the fiscal year would be $83,000 - $5,850 = $77,150.