Sarasota Corp. bought equipment on January 1, 2022. The equipment cost $450000 and had an expected salvage value of $70000. The life of the equipment was estimated to be 6 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

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.

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