Cutter Enterprises purchased equipment for $72,000 on January 1, 2018. The equipment is expected to have a five-year life and a residual value of $6,000. Using the straight-line method, depreciation for 2019 and the equipment's book value at December 31, 2019, would be: $13,200 and $39,600 respectively. $14,400 and $43,200 respectively. $13,200 and $45,600 respectively. $28,800 and $37,200 respectively.

Question

Dana Walsh

Business

14 February, 03:32

Cutter Enterprises purchased equipment for $72,000 on January 1, 2018. The equipment is expected to have a five-year life and a residual value of $6,000. Using the straight-line method, depreciation for 2019 and the equipment's book value at December 31, 2019, would be: $13,200 and $39,600 respectively. $14,400 and $43,200 respectively. $13,200 and $45,600 respectively. $28,800 and $37,200 respectively.

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Answers (1)

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Azaria Ritter · Answer 1

Depreciation for 2019 and the equipment's book value at December 31, 2019, would be: $13,200 and $45,600 respectively

Explanation:

Cutter Enterprises uses straight-line depreciation method, Depreciation Expense per year is calculated by following formula:

Annual Depreciation Expense = (Cost of the equipment - Residual Value) / Useful Life = ($72,000 - $6,000) / 5 = $13,200

Depreciation Expense for 2018 = $13,200

Accumulated depreciation at December 31, 2018 = $13,200

Depreciation Expense for 2019 = $13,200

Accumulated depreciation at December 31, 2019 = $13,200 + $13,200 = $26,400

The equipment's book value at December 31, 2019 = Cost of the equipment - Accumulated depreciation at December 31, 2019 = $72,000 - $26,400 = $45,600