Final answer:
The annual depreciation of the equipment is calculated using the straight-line method by subtracting the residual value from the cost and dividing by the asset's useful life. The correct annual depreciation for the equipment is $2,100.
Step-by-step explanation:
To calculate the annual depreciation using the straight-line method, you subtract the residual value of the asset from the cost and then divide it by the useful life of the asset.
The formula for annual depreciation expense is:
Annual Depreciation Expense = (Cost of the Asset - Residual Value) / Useful Life of the Asset
Given that Avalon Industries buys equipment for $24,000, expects to use it for 10 years, and expects its residual value to be $3,000, the calculation is as follows:
Annual Depreciation = ($24,000 - $3,000) / 10 years = $21,000 / 10 years = $2,100 per year
Therefore, the annual depreciation for the equipment should be reported as $2,100. So, the correct answer is b. $2,100.