Question 1197867: Hello, My problem is: Supreme Auto Service opened a new service center three decades ago. At the time the center was preparing to open, new equipment was purchased totaling $355,000. Residual value of the equipment was estimated to be $45,000 after 20 years. The company accountant has been using straight-line depreciation on the equipment.
annual depreciation for the original equipment was: 15,500
If the hydraulic lift had originally cost $14,200, what would its residual value (in $) be after 20 years?
Answer by Theo(13342)   (Show Source):
You can put this solution on YOUR website! if you assume the same depreciation parameters (20 year life, straight line depreciation, etc.), then the residual value of the hydraulic equipment should be a ratio of the residual value on the total equipment divided by the original value of the total equipment times the original value of the hydraulic equipment.
you would get:
residual value of the hydraulic equipment = 45000 / 355000 * 14200 = 1800.
this assumes the ratio of the residual value of the total equipment is the same ratio as the ratio of the residual value of the hydraulic equipment.
this may or may not be true, but without any additional information, you have no way of knowing that it will, or will not, be different.
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