Question

The Andrews Company has just purchased $43,088,000 of plant and equipment that has an estimated useful life of 15 years. The expected salvage value at the end of 15 years is $4,308,800. What will the book value of this purchase (exclude all other plant and equipment) be after its third year of use?

Answer 1

Answer: $35,332,160

Explanation:

The boik value of the purchase will be calculated thus:

Cost of plant = $43,088,000

Useful life = 15

Savage value = $4,308,800

Depreciation per year = ($43,088,000 - $4,308,800) / 15

= $38779200/15

= $2,585,280

Accumulated depreciation after third year will be:

= $2,585,280 × 3

= $7755840

Book value = $43,088,000 - $7,755,840

= $35,332,160