Answer to Question #78267 in Accounting for garry

Question

30. Will you recommend a company to buy this machine if the following information is given to you? Cost $60000, life is 9 years, scrap value after ten years is 9500, and Annual Deprecation is 10% straight line method.

Answer 1

Depreciable asset cost = $60000 - $9500 = $50500
Annual deprecation = $50500 x 10% = $5050
For 9 years the company will be able to return $45450 ($5050 x 9), which is less then the deprecation asset cost ($50500).
Therefore, I do not recommend buying this machine.