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1 November, 23:48

The andrews team has just purchased $56,804,000 of plant and equipment that has an estimated useful life of 15 years. Suppose at the end of 15 years this plant and equipment can be salvaged for $5,680,400 (1/10 of its original cost). What will be the book value of this purchase (excluding all other plant and equipment) after its first year of use.

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  1. 2 November, 00:52
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    Number of years = 15 years

    Purchase value = 56,804,000

    Salvage value = 5,680,400

    Annual depreciation = (Purchase value - Salvage value) / Number of years

    Annual depreciation = (56,804,000 - 5,680,400) / 15

    Annual depreciation = 51,123,600/15

    Annual depreciation = 3,408,240

    Book value after first year of use = Purchase value - Annual depreciation = 56,804,000 - 3,408,240 = 53,395,760

    The book value of this purchase (excluding all other plant and equipment) after its first year of use = $ 53,395,760
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