Answer to Question #265360 in Economics for Sera

Question

An equipment costing 5, 000, 000 can be sold for 1, 000, 000 after it’s useful life of five years. What will be the book value of the said equipment if the company plans to sell it the end of 3 years? Use the sum of years digit method.

Answer 1

The book value of the said equipment if the company plans to sell it the end of 3 years is:

$BV = 5,000,000 - 5/15×(5,000,000 - 1,000,000) - 4/15×4,000,000 - 3/15×4,000,000 = 1,800,000.$