On January 1, 1992, Carter Inc. purchased equipment having an estimated salvage value equal to 20% of its original cost at the end of a 10 year life. The equipment was sold December 31, 1996 for 50% of itsoriginal cost. If the equipment's disposition resulted in a reported loss, which of the following depreciation methods did Carter use?
Click on the arrows to vote for the correct answer
A. B. C. D. E.A
The straight-line method yields the lowest amount of depreciation for the early part of the depreciable life of the asset. Because only 50% of the original cost was received and straight-line accumulated depreciation equaled 40% of cost ((100%-20%) / 10 years X 5 years( at time of sale, a 10% loss (50%-(100%-40%)) occurs.