Gandolfi construction company purchased a used CAT 336D eart

Gandolfi construction company purchased a used CAT 336D earth mower at a cost of $325,000 in January 2013. The company\'s estimated useful life of this heavy equipment is 10 years, and the estimated salvage value is $75,000.00 Using straight-line depreciation, calculate the depreciation expense to be recognized for 2013, the first year of the equipment\'s life and calculate the equipment\'s net book value at December 31, 2015, the 3rd year of the equipment\'s life

Solution

Net cost of CAT 336D earth mower = 325000-75000 = 250000

Depreciation per annum = 250000/10 = 25000

Net book value on 31st December, 2013 = 250000-25000 = 225000

Net book value on 31st December, 2014 = 225000-25000 = 200000

Net book value on 31st December, 2015 = 2,00,000-25,000 = 1,75,000