kansas enterprises purchased equipment for $60,000 on january 1, 2024. the equipment is expected to have a…

kansas enterprises purchased equipment for $60,000 on january 1, 2024. the equipment is expected to have a five - year service life, with a residual value of $5,000 at the end of five years. using the straight - line method, depreciation expense for 2025 and the book value at december 31, 2025, would be: multiple choice $12,000 and $31,000, respectively. $12,000 and $36,000, respectively. $11,000 and $38,000, respectively. $11,000 and $33,000, respectively.

kansas enterprises purchased equipment for $60,000 on january 1, 2024. the equipment is expected to have a five - year service life, with a residual value of $5,000 at the end of five years. using the straight - line method, depreciation expense for 2025 and the book value at december 31, 2025, would be: multiple choice $12,000 and $31,000, respectively. $12,000 and $36,000, respectively. $11,000 and $38,000, respectively. $11,000 and $33,000, respectively.

Answer

Explanation:

Step1: Calculate annual depreciation expense

The formula for straight - line depreciation is $Depreciation\ expense=\frac{Cost - Residual\ value}{Useful\ life}$. Here, the cost of the equipment is $C = $60,000$, the residual value is $RV=$5,000$, and the useful life is $n = 5$ years. So, $Depreciation\ expense=\frac{60000 - 5000}{5}=\frac{55000}{5}=$11,000$.

Step2: Calculate book value at the end of 2025

The book value (BV) at the end of a period is calculated as $BV = Cost-(Depreciation\ expense\times Number\ of\ years)$. After 2 years (from January 1, 2024, to December 31, 2025), $BV=60000-(11000\times2)=60000 - 22000=$38,000$.

Answer:

$11,000$ and $38,000$, respectively (corresponding to the third multiple - choice option)