Question

A company purchases a piece of equipment on January 1, 2021, for $70,000 and the equipment has an expected useful life of five years. Its residual value is estimated to be $10,000. Assuming the company uses the straight-line depreciation method, what should be the balance in accumulated depreciation for the equipment as of December 31, 2023 (three years later)

Answer 1

Answer:

$36,000

Explanation:

Calculation for the balance in accumulated depreciation for the equipment as of December 31, 2023 will be:

Using this formula

(Equipment - Estimated residual value)÷ Expected useful life

Let plug in the formula

($70,000 − $10,000) / 5 years

$60,000/5

= $12,000 depreciation per year.

Calculation for the Accumulated depreciation will be:

Depreciation per year× Number of years

= $12,000 × 3 years

= $36,000.

Therefore the balance in accumulated depreciation for the equipment as of December 31, 2023 will be: $36,000