Answer:
The book value of the equipment at the end of two years = $170,000.
Explanation:
a) Data and Calculations:
Cost of capital equipment = $250,000
Salvage value = 50,000
Depreciable value = $200,000
Period of useful life = 5 years
Depreciation rate under the straight-line depreciation method =
$200,000/5 = $40,000
This implies that the annual depreciation expense will be $40,000.
For two years, the accumulated depreciation will be $80,000 ($40,000 * 2)
The book value of the equipment at the end of two years will be $170,000 ($250,000 - $80,000).
The book value of the equipment at the end of two years is $170,000.
Annual depreciation=(Cost-Salvage value)
Annual depreciation=$250,000-$50,000/5
Annual depreciation=$200,000/5
Annual depreciation= $40,000
Accumulated depreciation:
Accumulated depreciation=($40,000 ×2)
Accumulated depreciation=$80,000
Book value of equipment:
Book value of equipment=$250,000 - $80,000
Book value of equipment=$170,000
Inconclusion the book value of the equipment at the end of two years is $170,000.
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