The baldwin company has just purchased $40,900,000 of plant and equipment that has an estimated useful life of 15 years. the expected salvage value at the end of 15 years is $4,090,000. what will the book value of this purchase (exclude all other plant and equipment) be after its third year of use? (use fasb gaap) select: 1save answer $33,538,000 $35,446,667 $32,720,000 $29,448,000

To get the book value (BV) at the end of 3rd year, let us determine 1st the depreciation:

depreciation = ($40,900,000 - $4,090,000) / 15 years

depreciation = 2,454,000 / year

The reduction after 3 years is:

depreciation (3years) = ($2,454,000 / year) * 3 years

depreciation (3years) = $7,362,000

Therefore BV after 3 years is:

BV = $40,900,000 - $7,362,000

BV = $29,448,000

Book Value after 3 years = 33,538,000

Explanation:

Cost = $40,900,000

Salvage Value= 4,090,000

Useful Life= 15years

Depreciation using straight line method = Cost - Salvage Value

                                                                         Useful Life

Dep For Year 1 = 40,900,000-4,090,000

                                         15

Dep for Year 1 = 2,454,000 for Year 1

When Using straight line method Multiply the dep for Year 1 with the number of years to get the book value

Here Book Value after 3 years will be as follows

Depreciation of three years  = 2,454,000 x 3

                                               = 7,362,000

Book Value after 3 years= 40,900,000 - 7,362,000

Book Value = 33,538,000

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