Question

Antigua Company purchased a depreciable asset for $45,000 on October 1, 2012. The estimated salvage value is $9,000, and the estimated useful life is 6 years. The straight-line method is used for depreciation. What is the book value on July 1, 2017 when the asset is sold?(a)$10,500.(b)$15,750.(c)$25,500.(d)$34,500.

Answer 1

Answer:

$34500

Explanation:

In order to match with answer given in the options

Question should be, what is the book value on July 1, 2014 ?

With the sames question as given, answer will vary.

Given: Value of asset = $45000

           Estimated salvage value= $9000

           Estimated useful life = 6 years

Using the straight-line method of depreciation,

Depreciation value= $\frac{(purchase\ value\ of\ asset - salvage\ value)}{Estimated\ life\ of\ asset }$

We will also convert estimated useful life of asset from years to months

∴ $6\times 12\ months = 72\ months$

⇒ Depreciation value = $\frac{(45000-9000)}{72} = \ 500$

∴ Monthly depreciation of asset is $\ 500$

As we have to find book value on July 1, 2014, then number of months from October 1, 2012 to July 1, 2014 is 21 months.

Now, the amount of depreciation after 21 months = $Depreciation\ value\ every\ month \times number of months$

Amount of depreciation after 21 months = $500\times 21 = \ 10500$

Next to know the book value of asset on July 1, 2014

Book value of asset = $Purchase\ value - Monthly\ depreciation\ value$

Book value of asset = $45000 - 10500 = \ 34500$

∴ Value of asset on July 1, 2014 is $\ 34500$