Question
SAF Co depreciates computer equipment at a rate of 60% using the reducing-balance method. The equipment cost 50,000, has a life of three years and
SAF Co depreciates computer equipment at a rate of 60% using the reducing-balance method. The equipment cost 50,000, has a life of three years and a residual value of 3,200.
At the end of the second year of the equipment's life, a new accountant argued that the equipment should have been depreciated using the straight-line method rather than the reducing-balance method. At that point, the equity of the business stood at 446,000.
What would the equity figure have been at the end of the second year of the equipment's life if the straight-line method had been used throughout as suggested?
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