What Would the Book Value Be at the End of Year

question 128

Multiple Choice

What would the book value be at the end of year 6 for a piece of equipment using the straight-line method when cost is $8,000, residual value is $1,400, and the expected life is 11 years? (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.)

• A) $3,636
• B) $3,600
• C) $4,400
• D) $3,000

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Definitions:

Straight-Line Method

A technique for calculating depreciation or amortization that uniformly distributes the cost of an asset across its lifespan.

Depreciation Expense

The allocation of the cost of a tangible fixed asset over its useful life, reflecting the asset's consumption, wear and tear, or obsolescence.

Installation Costs

Expenses related to setting up or installing equipment, machinery, or other assets for operational use.

Capitalize

The process of recording an expenditure as an asset on a balance sheet, rather than expensing it immediately, spreading its cost over its useful life.