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A company purchased new furniture at a cost of $16,000 on January 1. The furniture is estimated to have a useful life of 6 years and a $1,000 salvage value. The company uses the straight-line method of depreciation. What is the book value of the furniture on December 31 of the first year?

Respuesta :

porteramy25

Answer:

($16,000-$1,000)/6 years = $2,500 per year.

$16,000 - $2,500 = $13,500

Explanation:

Cricetus

On December 31 of the year, the book value of the furniture will be "$13500".

Given:

Asset's initial cost,

  • $16,000

Salvage value,

  • $1,000

Asset's useful life,

  • 6 years

→ The depreciation expense will be:

= [tex]\frac{Asset's \ initial \ cost- Salvage \ value}{Asset's \ useful \ life}[/tex]

By substituting the values, we get

= [tex]\frac{16000-1000}{6}[/tex]

= [tex]\frac{15000}{6}[/tex]

= [tex]2500 \ per \ year[/tex]

hence,

On the 1st year of December 31, the book value will be:

= [tex]Asset's \ initial \ cost - Accumulated \ depreciation[/tex]

= [tex]16000-2500[/tex]

= [tex]13500[/tex] ($)

Thus the above approach is correct.

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