An asset with unknown first cost value is depreciated by the straight-line method over its five year life. Its annual operating cost is $20,000 and its salvage value is expected to be $10,000. The book value at the end of year five will be nearest to:

An asset with unknown first cost value is depreciated by the straight-line method over its five year life. Its annual operating cost is $20,000 and its salvage value is expected to be $10,000. The book value at the end of year five will be nearest to:

Name: An asset with unknown first cost value isdepreciated by the straight-
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Description: An asset with unknown first cost value isdepreciated by the straight-line methodover its five year life. Its annual operatingcost is $20,000 and its salvage value isexpected to be $10,000. The book value atthe end of year five will be nearest to:

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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Question

An asset with unknown first cost value is
depreciated by the straight-line method
over its five year life. Its annual operating
cost is $20,000 and its salvage value is
expected to be $10,000. The book value at
the end of year five will be nearest to:

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