Question

Depreciation is the decrease or loss in value of an item due to age, wear, or market conditions. We usually consider depreciation on expensive items like cars. Businesses use depreciation as a loss when calculating their income and taxes. One company buys a new bulldozer for $138000. The company depreciates the bulldozer linearly over its useful life of 23 years. Its salvage value at the end of 23 years is $14950.

Express the value of the bulldozer, V, as a function of how many years old it is, t. Preview The value of the bulldozer after 3 years is $

Answer 1

Answer:The value of the bulldozer after 3 years is $121950

Explanation:

We would apply the straight line depreciation method. In this method, the value of the asset(bulldozer) is reduced linearly over its useful life until it reaches its salvage value. The formula is expressed as

Annual depreciation expense =

(Cost of the asset - salvage value)/useful life of the asset.

From the given information,

Useful life = 23 years

Salvage value of the bulldozer = $14950

Cost of the new bulldozer is $138000

Therefore

Annual depreciation = (138000 - 14950)/ 23 = $5350

The value of the bulldozer at any point would be V. Therefore

5350 = (138000 - V)/ t

5350t = 138000 - V

V = 138000 - 5350t

The value of the bulldozer after 3 years would be

V = 138000 - 5350×3 = $121950