Question

A new machine costs $200,000 and has a useful life of 5 years, with a salvage value of $30,000. It will cost $5,000 to dismantle and remove the machine at the end of its useful life. Use straight line depreciation to determine book value of asset at end of year 3.

Answer 1

The book value at the end of year 3 is $100,000

Step-by-step explanation:

Yearly Depreciation =(cost+cost of dismantling-salvage value)/useful life

cost is $200,000

cost of dismantling is $5000

salvage value is $30000

useful life is 5 years

Yearly depreciation=(200000+5000-30000)/5

Yearly depreciation=$35000

Depreciation for three years=$35000*3

=$105000

Book value at the end of year 3=total cost of machine-three years' depreciation

Book value at end of year 3=$200000+$5000-$105000

Book value at the end of year 3=$100,000