Gulf consulting co. reported the following on its december 31, 2021, 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, 2021. what is the book value of gulf's equipment at december 31, 2021?

$259,000

Explanation:

Data provided in the question:

Cost of equipment = $700,000

Useful life = 5 years

Salvage value = 10% of cost

= 0.10 × $700,000 = $70,000

Now,

Annual depreciation = [Cost - salvage value] ÷ Useful life

= [$700,000 - $70,000 ] ÷ 5

= $126,000

Therefore,

The depreciation expense till December 31, 2021

= Annual depreciation × Life elapsed

= $126,000 × 3.5

= $441,000

Thus,

Book value of Gulf's equipment at December 31, 2021

= Cost - depreciation expense

= $700,000 - $441,000

= $259,000

d) social security number

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