Florida General Contractor Practice Exam 2025 - Free Contractor License Practice Questions and Study Guide

To determine the book value of the equipment after 4 years using straight-line depreciation, first calculate the annual depreciation expense. The straight-line depreciation formula is:

Annual Depreciation = (Cost of the Asset - Salvage Value) / Useful Life

In this case, the cost of the equipment is $20,000, the salvage value is $5,000, and assuming a useful life of 10 years (a common estimate for equipment), the annual depreciation would be:

Annual Depreciation = ($20,000 - $5,000) / 10 years = $15,000 / 10 = $1,500 per year.

Over 4 years, the total depreciation would be:

Total Depreciation = Annual Depreciation × Number of Years

Total Depreciation = $1,500 × 4 = $6,000.

Subtracting the total depreciation from the original cost gives the book value:

Book Value = Cost of the Asset - Total Depreciation

Book Value = $20,000 - $6,000 = $14,000.

However, it appears there may be an aspect of the question that wasn't taken into consideration regarding the possible useful life. If a different useful life leads to a