Capital Equipment Costing $250,000 Today Has $50,000 Salvage Value at the End

question 56

Multiple Choice

Capital equipment costing $250,000 today has $50,000 salvage value at the end of five years. If the straight-line depreciation method is used, what is the book value of the equipment at the end of two years?

• A)$200,000
• B)$170,000
• C)$140,000
• D)$150,000

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Definitions:

Operating Lease

An agreement that permits the utilization of an asset without owning it, usually with a shorter duration than a finance lease.

Fair Value

What one would earn from selling an asset or what it would cost to shift a liability in a systematic operation with market actors on the appraisal date.

Guaranteed Residual Value

The predetermined value of a leased asset at the end of the lease term, guaranteed by the lessee or a third party.

Present Value Interest Factors

A factor that is used to determine the present value of a future sum or series of future payments, discounted at a specific interest rate.