Water Stone Company purchased equipment at the beginning of 2016 for $92,000 and
ID: 2510109 • Letter: W
Question
Water Stone Company purchased equipment at the beginning of 2016 for $92,000 and decided to depreciate it over an 8-year period using the straight-line method. The equipment's residual value was estimated at $3,600. The estimated fair market value at the end of 2016 was $70,000. Which of the following statements is correct at December 31, 2016?
a.
The book value of the equipment will be $80,950.
b.
The equipment should be reported on Water Stone’s balance sheet at it’s fair market value of $70,000.
c.
The total credit balance for accumulated depreciation will be $11,500.
d.
The balance in the Equipment account will be reported as $80,950.
a.
The book value of the equipment will be $80,950.
b.
The equipment should be reported on Water Stone’s balance sheet at it’s fair market value of $70,000.
c.
The total credit balance for accumulated depreciation will be $11,500.
d.
The balance in the Equipment account will be reported as $80,950.
Explanation / Answer
Depreciation for 2016=(92000-3600)/8= $11050 Book value at the end of 2016=92000-11050= $80950 Option A The book value of the equipment will be $80,950 is correct
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