On January 1, 2013, P.T. Scope Company purchased a computer system for $4,860. The company expects to use the system for 3 years. The asset has no residual value. The book value of the system at December 31, 2014 is
A) $0.
B) $1,620.
C) $3,240.
D) $4,860.

Question

Quizplus · Accepted Answer

The computer system is depreciated over 3 years. By December 31, 2014, two years of depreciation have occurred. The annual depreciation is $4,860 / 3 = $1,620. After two years, the accumulated depreciation is $1,620 * 2 = $3,240. Therefore, the book value is $4,860 - $3,240 = $1,620.