Question

Furniture for the lobby of a nursing facility has been purchased for $8,000. The useful life of the furniture is 7 years, and it has a salvage value of $1,000.

What would be the book value of the furniture 4 years after purchase?

Answer 1

$4000

Explanation:

The difference between the purchase price and the salvage value is $7000. If that depreciation is considered to be linear over the 7-year period, it amounts to $1000 per year.

After 4 years, the furniture has depreciated in value by $4000, so is expected to be worth ...

$8000 -4000 = $4000