A company buys a major piece of computer equipment for £100,000 and expects this to last for 4 years, after which it will most likely be scrapped with no value. At the end of the first year, the financial statements will show:
A) A depreciation expense of £20,000 and a net asset value of £100,000
B) A depreciation expense of £25,000 and a net asset value of £100,000
C) A depreciation expense of £20,000 and a net asset value of £75,000
D) A depreciation expense of £25,000 and a net asset value of £75,000

Question

Quizplus · Accepted Answer

The correct depreciation expense is £25,000 per year (£100,000 / 4 years), resulting in a net asset value of £75,000 (£100,000 - £25,000) at the end of the first year.

A Company Buys a Major Piece of Computer Equipment for £100,000