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slavikrds [6]
3 years ago
10

Gravity Hospital purchased a new item of equipment on January 1,20X1. The equipment has an estimated useful life of ten years an

d an expected salvage value of 20 percent. Gravity Hospital’s December 31, 20X5, balance sheet reports $10,000 of accumulated depreciation on this equipment. What was the cost of the equipment when it was acquired on January 1, 20X1?
Mathematics
1 answer:
qaws [65]3 years ago
8 0

Answer:

  $25000

Step-by-step explanation:

If the salvage value is 20% of the cost, then 80% of the cost will be depreciated over 10 years. Over the 5 years from Jan 1 20X1 to Dec 31 20X5, the $10,000 accumulated depreciation represents 5/10 of that 80%, or 40% of the initial cost.

  $10,000 = 0.40 × cost

  $10,000/0.40 = cost = $25,000

The acquisition cost of the equipment was $25,000.

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