Answer to Question #273936 in Civil and Environmental Engineering for Alan Enrico V Tuib

Question #273936

An asset that is book-depreciated over a 5-year period by the straight-line method has BV3 = $62,000



with a depreciation charge of $26,000 per year. Determine (a) the first cost of the asset and (b) the



assumed salvage value.

1
Expert's answer
2021-12-06T22:57:01-0500

Part-A)

  • The first cost of the asset:

Here the formula derived for the book value of an asset will be:

Book Value = Initial cost − Accumulated depreciation 


 

Thus, the first cost will be:

Book Value = Initial cost − Accumulated depreciation

$62,000 = Initial cost − 3 × depreciation/year

$62,000 = Initial cost − $78,000

Initial Cost = $62,000 + $78,000

Initial Cost = $140,000


Part-B)

  • The assumed salvage value:



Salvage Value:

Salvage Value = Initial Cost − Total asset life × Depreciation/year

Salvage Value = $140,000 − (5 × $26,000)

Salvage Value = $140,000 − $130,000

Salvage Value = $10,000



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