Jobe Concrete Products placed a new sand sifter into production 3 years ago. It had an installed cost of $100,000, a life of 5 years, and an anticipated salvage of $20,000. Book depreciation charges for the 3 years are $40,000, $24,000, and $14,000, respectively. (a) Determine the book value after 2 years. (b) If the sifter’s market value today is $20,000, determine the difference between its current book value and its market value. (c) Determine the total percentage of the unadjusted basis written off through year 3.
What will be an ideal response?
(a) BV2 = 100,000 – (40,000 + 24,000)
= $36,000
(b) BV3 = 100,000 – (40,000 + 24,000 +14,000) = $22,000
Difference = 22,000 - 20,000 = $2000
Market value is lower
(c) Percent written off = [(40,000 + 24,000 + 14,000)/100,000](100%)
= 78%
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