A construction company decided to purchase a concrete mixer truck for $75,000 with a trade-in of their old mixer. The old mixer has a trade-in value of $7,000. The new mixer will be kept for 15 years before being sold. Its estimated salvage value at that time is expected to be $5,000. Assume interest to be 12%. Determine the 11th year BVB by Declining Balance Method (round-off k to 4 decimal places)
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
A construction company decided to purchase a concrete mixer truck for $75,000 with a trade-in of their old mixer. The old mixer has a trade-in value of $7,000. The new mixer will be kept for 15 years before being sold. Its estimated salvage value at that time is expected to be $5,000. Assume interest to be 12%. Determine the 11th year BVB by Declining Balance Method (round-off k to 4 decimal places)
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