Magic Company owns a fixed asset with an original cost of $100,000. Magic Company estimates it will use the asset for 4 years, at which time the asset can be sold for $10,000. The book value of the asset after two years of use is:
A) $100,000
B) $45,000
C) $55,000
D) $50,000

Question

Quizplus · Accepted Answer

The asset is depreciated over 4 years with a $10,000 salvage value, so the annual depreciation is ($100,000 - $10,000) / 4 = $22,500. After two years, the depreciation is 2 * $22,500 = $45,000. The book value is $100,000 - $45,000 = $55,000.

Magic Company Owns a Fixed Asset with an Original Cost