A company purchases office equipment for $12,000 on January 1, 2024. The equipment has an estimated salvage value of $2,000 and a useful life of 5 years.

Question:

A company purchases office equipment for $12,000 on January 1, 2024. The equipment has an estimated salvage value of $2,000 and a useful life of 5 years.

1. Using the straight-line method, calculate:

   • (a) The annual depreciation expense.

   • (b) The book value of the equipment at the end of the third year.

2. If the company uses the reducing balance method with a depreciation rate of 40%, calculate the book value at the end of the second year.