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6 July, 10:07

The digby company has just purchased $40,900,000 of plant and equipment that has an estimated useful life of 15 years. the expected salvage value at the end of 15 years is $4,090,000. what will the book value of this purchase (exclude all other plant and equipment) be after its third year of use

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  1. 6 July, 11:21
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    Using line depreciation method,

    Depreciable cost = Cost - Salvage value = $40,900,000 - $4,090,000 = $36,810,000

    Depreciation per year = Depreciable cost/life = 36,810,000/15 = $2,454,000

    After third year of use,

    Depreciation expenses = $,2,454,000*3 = $7,362,000

    Book value = cost - depreciation expenses = 40,900,000 - 7,363,000 = $33,538,000
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