a race car is purchased for $46,000 and has a resale value of $32,000 after a useful life of 8 years. using…
a race car is purchased for $46,000 and has a resale value of $32,000 after a useful life of 8 years. using a book value depreciation chart, calculate the number of years until the book value of the race car is $37,250.\n? years
Answer
Explanation:
Step1: Calculate annual depreciation
The formula for straight - line depreciation is $D=\frac{P - S}{n}$, where $P$ is the initial purchase price, $S$ is the salvage value, and $n$ is the useful life. Here, $P = 46000$, $S=32000$, and $n = 8$. So, $D=\frac{46000 - 32000}{8}=\frac{14000}{8}=1750$.
Step2: Calculate the depreciation amount from initial to target book value
The initial book value is $P = 46000$ and the target book value is $37250$. The depreciation amount $d$ is $46000 - 37250=8750$.
Step3: Calculate the number of years
We know that $d = D\times t$, where $t$ is the number of years. So, $t=\frac{d}{D}$. Substituting $d = 8750$ and $D = 1750$, we get $t=\frac{8750}{1750}=5$.
Answer:
5