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28 December, 19:18

A new machine costs $200,000 and has a useful life of 5 years, with a salvage value of $30,000. It will cost $5,000 to dismantle and remove the machine at the end of its useful life. Use straight line depreciation to determine book value of asset at end of year 3.

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  1. 28 December, 19:35
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    The book value at the end of year 3 is $100,000

    Explanation:

    Yearly Depreciation = (cost+cost of dismantling-salvage value) / useful life

    cost is $200,000

    cost of dismantling is $5000

    salvage value is $30000

    useful life is 5 years

    Yearly depreciation = (200000+5000-30000) / 5

    Yearly depreciation=$35000

    Depreciation for three years=$35000*3

    =$105000

    Book value at the end of year 3=total cost of machine-three years' depreciation

    Book value at end of year 3=$200000+$5000-$105000

    Book value at the end of year 3=$100,000
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