A business bought equipment on January 1, 2022. The equipment cost Sh 180,000 and had an expected salvage value of Sh 30,000. The life of the equipment was estimated to be 6 years. The depreciable cost of the equipment is A. Sh 25,000 B. Sh 150,000 C. Sh 180,000 D. Sh 100,000
Question
A business bought equipment on January 1, 2022. The equipment cost Sh 180,000 and had an expected salvage value of Sh 30,000. The life of the equipment was estimated to be 6 years. The depreciable cost of the equipment is
A. Sh 25,000
B. Sh 150,000
C. Sh 180,000
D. Sh 100,000
Solution
The depreciable cost of an asset is the cost of the asset minus its expected salvage value.
Here's how you calculate it:
Step 1: Identify the cost of the asset. In this case, the cost of the equipment is Sh 180,000.
Step 2: Identify the salvage value of the asset. In this case, the salvage value of the equipment is Sh 30,000.
Step 3: Subtract the salvage value from the cost of the asset.
So, Sh 180,000 (cost of the equipment) - Sh 30,000 (salvage value) = Sh 150,000.
Therefore, the depreciable cost of the equipment is Sh 150,000. So, the correct answer is B. Sh 150,000.
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