Question

The Andrews Company has just purchased $56,480,000 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 $5,648,000 (1/10th 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

Answer 1

$53,091,200

Step-by-step explanation:

Depreciation expenses = Cost - Salvage value / Expected useful life of the plant and equipment

Depreciation expenses = $56,480,000 - $5,648,000 / 15 years

Depreciation expenses = $50,832,000 / 15 years

Depreciation expenses = $3,388,800

Book value = Cost - Depreciation expenses for first year

Book value = $56,480,000 - $3,388,800

Book value = $53,091,200

Thus, the book value of plant and equipment after its first year of use is $53,091,200.