Question

A construction company decided to purchase a concrete mixer truck for $85,000 with a trade-in of their old mixer. The old mixer has a trade-in value of $10,000. The new mixer will be kept for 10 years before being sold. Its estimated salvage value at that time is expected to be $5,000. Assume interest to be 12%. Determine the 8th year BVB by Sinking Fund Method.

Answer 1

year	annual depreciation	interest earned	increase in fund value	accumulated depreciation	book value
0	-	-	-	-	75,000.00
1	3,988.89	-	3,988.89	3,988.89	71,011.11
2	3,988.89	478.67	4,467.56	8,456.45	66,543.55
3	3,988.89	1,014.77	5,003.67	13,460.12	61,539.88
4	3,988.89	1,615.21	5,604.11	19,064.22	55,935.78
5	3,988.89	2,287.71	6,276.60	25,340.82	49,659.18
6	3,988.89	3,040.90	7,029.79	32,370.61	42,629.39
7	3,988.89	3,884.47	7,873.36	40,243.97	34,756.03
8	3,988.89	4,829.28	8,818.17	49,062.14	25,937.86
9	3,988.89	5,887.46	9,876.35	58,938.49	16,061.51
10	3,988.89	7,072.62	11,061.51	70,000.00	5,000.00

book value at end of 8th year is $ 25937.86