Question

Snyder, Inc. purchased equipment for $400,000 which was estimated to have a useful life of 10 years and a salvage value of $20,000. At the beginning of year 5, Snyder changed it’s estimate to a total of 8 years from the date of purchase with a salvage value of $10,000. What is the book value of the equipment at the end of year 5?

Answer 1

Answer:book value at end of year 5=$188,500.

Step-by-step explanation:

Depreciation per year= (Cost-Salvage value)/Useful life

=(400,000-20,000)/10= $38000 per year

Book value after 4 years, Beginning of year 5= Cost - depreciation x number of years

$400,000 - (38000 x 4)= $248,000

Depreciation per year now= (Cost-Salvage value)/Useful life

($248000-$10,000)/4 = $59,500 per year.

Therefore, book value at end of year 5=Book value at the beginning of year 5 - depreciation

$248,000- $59,500 )= $188,500.