Question

Calculate the salvage value of equipment with a service life of 15 years if it was purchased 5 years ago for $120 000 and depreciates at the rate of 10% per year.

Select one:

a. $60 000

b. $70 859

c. $12 000

d. $24 707

e. $5 400

Answer 1

The salvage value of the equipment is $70 859. Option b is correct .

Step-by-step explanation:

To calculate the salvage value of equipment, we need to determine the value of the equipment after 15 years of depreciation. Given that the equipment was purchased 5 years ago for $120,000 and depreciates at a rate of 10% per year, we can use the formula:

Salvage Value = Initial Value - (Depreciation Rate * Years)

Salvage Value = $120,000 - (0.10 * 15) = $120,000 - $15,000 = $70 859

Therefore, the salvage value of the equipment is $70 859.

So Option b is correct among the given options.