Answer:
The book value of the equipment at the starting of 3rd year is $323,334.
Explanation:
Computing Accumulated depreciation as:
Accumulated depreciation for the year = Cost - Salvage value / Number of years
= $450,000 - $70,000 / 6
= $380,000 / 6
Accumulated depreciation for the year = $63,333.33
As the company uses the straight line, this depreciation will be same for every year.
The book value is computed as:
For the first year the book value would be:
Book value = Cost - Any accumulated depreciation
= $450,000 - $63,333
= $386,667
For the second year the book value would be:
Book value = Cost - Any accumulated depreciation
= $386,667 - $63,333
= $323,334
The second year book value will be the beginning of third year. Therefore, the book value of third year at beginning is $323,334.
