In: Economics
Equipment is purchased which has an initial cost of $125,000. It has a 10 year life and its salvage value is estimated to be $12,000.
Determine the book value of the asset after six year.
Depriciation expense per year = ( Initial cost - Salvage value ) / 10
Initial cost - Salvage value is equal to the toatl depriciation accumulated in 10 years and as we have to find out the book value after 6 years therefore accumulated depriciation in 6 years has to be find out first.
Depriciation expense per year = ( $125,000 - $12000 ) / 10
= $113,000 / 10
= $11,300
Total accumulated depriciation in 6 years = $11,300 * 6
= $67,800
Book Value = Cost - Accumulated Depriciation
= $125,000 - $67,800
= $57,200