Question

Riverbed Corp bought equipment on January 1, 2022. The equipment cost $460000 and had an expected salvage value of $65000. The life of the equipment was estimated to be 5 years. The company uses the straight-line method of depreciation. The book value of the equipment at the beginning of the third year would be $395000. $158000. $302000. $460000.

Answer 1

Answer:

Book value= $302,000

Explanation:

Giving the following information:

Purchase price= $460,000

Salvage value= $65,000

Useful life= 5 years

First, we need to calculate the annual depreciation.

Annual depreciation= (original cost - salvage value)/estimated life (years)

Annual depreciation= (460,000 - 65,000) / 5

Annual depreciation= $79,000

Now, the accumulated depreciation after 2 full years:

Accumulated depreciation= 79,000*2= $158,000

Finally, the book value:

Book value= purchase price - accumulated depreciation

Book value= 460,000 - 158,000

Book value= $302,000