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

Question

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.

Answer 1

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