Question

Kansas Enterprises purchased equipment for $79,000 on January 1, 2021. The equipment is expected to have a five-year service life, with a residual value of $6,900 at the end of five years. Using the straight-line method, depreciation expense for 2022 and the book value at December 31, 2022, would be: Multiple Choice $14,420 and $50,160. $14,420 and $43,260. $15,800 and $40,500. $15,800 and $47,400.

Answer 1

Answer:

Annual depreciation= $14,420

Book value= $50,160

Explanation:

Giving the following information:

Purchase price= $79,000

Useful life= 5 years

Salvage value= $6,900

To calculate the depreciation expense, we need to use the following formula:

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

Annual depreciation= (79,000 - 6,900) / 5

Annual depreciation= $14,420

Now, the book value:

Book value= purchase price - accumulated depreciation

Book value= 79,000 - (14,420*2)

Book value= $50,160