farm equipment has a class life of 10 years. the graph below illustrates the book value (or depreciated…

farm equipment has a class life of 10 years. the graph below illustrates the book value (or depreciated value) of one farmer’s equipment for the first two years and last two years of ownership. the equipment is being depreciated using the straight - line depreciation method. a line is provided to help you estimate each of the values below. part a: estimate the cost of the equipment. cost = $ 130,000 part b: estimate the salvage value of the equipment. salvage value = $ 12,000 part c: estimate the book value of the equipment in year 4. book value in year 4 = $ part d: the equation for the book value of the farm equipment is value = 130,000 - 12,000(years) use the equation to determine the book value when the equipment is six years old. book value at the end of year 6 = $ part e: is your answer for part d an example of interpolation or extrapolation?

farm equipment has a class life of 10 years. the graph below illustrates the book value (or depreciated value) of one farmer’s equipment for the first two years and last two years of ownership. the equipment is being depreciated using the straight - line depreciation method. a line is provided to help you estimate each of the values below. part a: estimate the cost of the equipment. cost = $ 130,000 part b: estimate the salvage value of the equipment. salvage value = $ 12,000 part c: estimate the book value of the equipment in year 4. book value in year 4 = $ part d: the equation for the book value of the farm equipment is value = 130,000 - 12,000(years) use the equation to determine the book value when the equipment is six years old. book value at the end of year 6 = $ part e: is your answer for part d an example of interpolation or extrapolation?

Answer

Explanation:

Step1: Recall straight - line depreciation formula

The general formula for straight - line depreciation is $V = C−dY$, where $V$ is the book value, $C$ is the cost, $d$ is the annual depreciation, and $Y$ is the number of years. We know $C = 130000$ and $d=12000$.

Step2: Calculate book value in Year 4

Substitute $Y = 4$ into the formula $V = 130000-12000Y$. So $V=130000 - 12000\times4=130000 - 48000=82000$.

Step3: Calculate book value in Year 6

Substitute $Y = 6$ into the formula $V = 130000-12000Y$. So $V=130000-12000\times6=130000 - 72000 = 58000$.

Answer:

Book value in Year 4 = $82000$ Book value at the end of Year 6 = $58000$