Question

They purchased a new computer system for $3,500. The total resale value after 5 years is estimated to be $525. Using the straight-line method, they determined that the computer system would depreciate $595 per year. Use the table above to determine the book value at the end of the third year.

Possible answers.

(A) $1,690
(B) $1,715
(C) $1,865
(D) $1,940

Answer 1

Using the straight-line depreciation method, the annual depreciation amount is $595, and after three years, the total depreciation would be $1,785 (595 x 3).

To find the book value at the end of the third year, we subtract the total depreciation from the original cost of the computer system:

$3,500 - $1,785 = $1,715

Therefore, the correct answer is (B) $1,715.