On January 1, 2009, P.T. Scope Company purchased a computer system for $3,240. The company expects to use the system for 3 years. The asset has no salvage value. The book value of the system at December 31, 2010 is
A) $0.
B) $1,080.
C) $2,160.
D) $3,240.

Question

Quizplus · Accepted Answer

Using the straight-line depreciation method, we can calculate the annual depreciation as follows:

Annual Depreciation = (Cost - Salvage Value) / Useful Life
Annual Depreciation = ($3,240 - $0) / 3 years
Annual Depreciation = $1,080

To find the book value of the system at December 31, 2010, we need to subtract the accumulated depreciation from the original cost:

Book Value = Cost - Accumulated Depreciation
Book Value = $3,240 - ($1,080 x 2 years)
Book Value = $1,080

Therefore, the correct answer is B) $1,080.