An asset was purchased for $80,000 on January 1, Year 1, and originally estimated to have a useful life of 10 years with a residual value of $10,000. At the beginning of the third year, it was determined that the asset would be sold. Calculate the net book value at the end of year three using the straight-line method.

An asset was purchased for $80,000 on January 1, Year 1, and originally estimated to have a useful life of 10 years with a residual value of $10,000. At the beginning of the third year, it was determined that the asset would be sold. Calculate the net book value at the end of year three using the straight-line method.

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Description: An asset was purchased for $80,000 on January 1, Year 1, and originally estimated to have a useful life of 10 yearswith a residual value of $10,000. At the beginning of the third year, it was determined that the asset would besold. Calculate the net

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

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.

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An asset was purchased for $80,000 on January 1, Year 1, and originally estimated to have a useful life of 10 years
with a residual value of $10,000. At the beginning of the third year, it was determined that the asset would be
sold. Calculate the net book value at the end of year three using the straight-line method.
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