Question

xyz company purchased an asset for $40,357. it cost $2,329 in freight costs to get it to their loading dock. they also had $3,195 in installation costs. salvage value is estimated to be $11,883 and the useful life is 10 years. what is net book value at the end of year 5?

Answer 1

To find the net book value of the asset at the end of year 5, add the initial cost, freight costs, and installation costs. Calculate the annual depreciation by dividing the initial cost minus the salvage value by the useful life.

Step-by-step explanation:

To find the net book value of an asset at the end of year 5, we need to calculate the accumulated depreciation for the first 5 years and subtract it from the initial cost of the asset.

The initial cost of the asset was $40,357, and we need to add the freight costs of $2,329 and installation costs of $3,195 to get the total initial cost of $45,881.

The annual depreciation can be calculated by dividing the initial cost minus the salvage value by the useful life of the asset. In this case, the annual depreciation is (45,881 - 11,883) / 10 = $3,999.8.

Multiply the annual depreciation by the number of years to get the accumulated depreciation. Subtract the accumulated depreciation from the initial cost to find the net book value.

To find the accumulated depreciation for the first 5 years, we multiply the annual depreciation by the number of years, which is $3,999.8 * 5 = $19,999.

The net book value at the end of year 5 is the initial cost minus the accumulated depreciation, which is $45,881 - $19,999 = $25,882.