Amanufacturing plant was built at a cost of p5m and is estimated to have a life of 20 years with a salvage value of p1m. a certain equipment worth p570,000 was installed at a cost of p80,000 is expected to operate economically for 15 years with a salvage value of p50,000. determine the book value of the plant and equipment after 10 years, use straight line depreciation method. a. p3,250,000b. p4,250,000c. p3,750,000d. p4,500,000

A. 3,250,000

Step-by-step explanation:

For calculate the book value of the plant and equipment after 10 years, we need to calculate the annual depreciation. Using the straight line depreciation method, the equation for the annual depreciation is:

For the manufacturing plant, the initial cost is 5M, the salvage value is 1M and the life time is 20 year, then every year the manufacturing plant reduce its books value by:

For the equipment, the initial cost is the sum of 570,000 and the installed cost 80,000, the salvage value is 50,000 and the life time is 15 year, then every year the equipment reduce its books value by:

Then, the book value of the plant and equipment after 10 years is calculate as:

Book value = Initial cost - 10*(annual depreciation)

Book value Plant =5,000,000 - 10*(200,000)

Book value plant =3,000,000

Book value equipment = (570,000+80,000) - 10*(40,000)

Book value equipment = 250,000

Finally, the book value of the plant and equipment after 10 years, using the straight line depreciation method is the sum of 3,000,000 and 250,000. It is P3,250,000

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