Question

An asset costs $150,000 and has a salvage value O of $15,000 after 10 years. What is the depreciation charge for the 4th year, and what is the book value at the end of the 8th year with (a) Straight-line depreciation

Answer 1

$13,500

$42,000

Step-by-step explanation:

Fixed cost of asset = 150000

Salvage value = 15000

Period = 10 years

Annual Depreciation = (fixed cost of asset - Salvage a value) / period

Annual Depreciation = (150000 - 15000) / 10

Annual Depreciation = 135000 / 10

Annual Depreciation = $13500

The 4th year depreciation is also $13,500 as the annual Depreciation charge is equal for each year.

The book value at the end of the 8th year :

Depreciation for 8 years = (13500 * 8) = $108,000

Book value at the end of 8 years = Cost of asset - $108,000

= $150,000 - $108,000

= $42,000