San Gabriel Company owns a fixed asset with an original cost of $100,000.The company estimates it will use the fixed asset for four years,at which time it will be sold for $10,000.The book value of the fixed asset after three years of use is ________.
A)$32,500
B)$45,000
C)$50,000
D)$100,000

Question

Quizplus · Accepted Answer

The book value of a fixed asset is its original cost minus the accumulated depreciation. The accumulated depreciation is the total amount of depreciation that has been recorded for the asset. In this case, the asset has been used for three years, so the accumulated depreciation is 3/4 of the total depreciation. The total depreciation is the original cost minus the salvage value, which is $100,000 - $10,000 = $90,000. Therefore, the accumulated depreciation is 3/4 * $90,000 = $67,500. The book value is the original cost minus the accumulated depreciation, which is $100,000 - $67,500 = $32,500.

San Gabriel Company Owns a Fixed Asset with an Original