Gulf Consulting Co

question 50

Multiple Choice

Gulf Consulting Co. reported the following on its December 31, 2009, balance sheet: Equipment (at cost) ..$700,000
In a disclosure note, Gulf indicates that it uses straight-line depreciation over five years and estimates salvage value as 10% of cost. Gulf's equipment averages 3.5 years at December 31, 2009. What is the book value of Gulf's equipment at December 31, 2009?

• A)$490,000
• B)$441,000
• C)$259,000
• D)$210,000 Annual depreciation is ($700,000 70,000) 5 = $126,000
• Depreciation for 3.5 years is $126,000 3.5 = $441,000
• Book value = $700,000 441,000 = $259,000

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