Question

Cat Corporation has the below facts. ### ### ### #### Other Information 1) Equipment Sale = June 30, 20X7 2) Accumulated Depreciation as of Dec 31, 20x6 = $18,000 3) Capitalized Cost of the Sold Equipment = $ 30,000 4) Depreciation Expense Per Year = $3,000 5) Life of the Sold Equipment = 10 Years 6) Salvage Value = None 7) Depreciation Method = Straight-Line Depr. Method 8) Cash Received from the Sold Equipment = $ 8,000 What is the book value of the sold equipment (on the day the equipment was sold, find the second number in the book value on the day the equipment was sold)? Book Value (second number) => Number => 2 or 3 Number -> 4 or 5 Number => 6 or 7 Number => 0 or 1 Number -> 8 or 9 • Previous Next →

Answer 1

The following data is given in the Question :

Capitalized cost of the sold equipment = $30,000

Depreciation expense per year = $3,000

Accumulated Depreciation as of Dec 31, 20X6 = $18,000

Now, the book value of the sold equipment as of Dec 31, 20X6 = $30,000 - $18,000 = $12,000

The equipment is sold on June 30, 20X7.

The question requires the calculation of book value of the equipment on June 30, 20X7 which is calculated below :

Book value of the sold equipment as of Dec 31, 20X6 = $12,000

Less : Depreciation for Jan 1, 20X7 to June 30, 20X7 = $ 1,500 ($3,000 *6/12)

Book value of the sold equipment as of June 30, 20X7 = $10,500

Therefore, the second number in the book value is 0 and hence, the correct answer is the third option - Number => 0 or 1.