A consulting company is interested in buying a new complete computer system with

Question

A consulting company is interested in buying a new complete computer system with printers, plotters, and servers. The Purchased price is $1,200,000 and a life span that minimizes the Equivalent Uniform Annual Cost. The Salvage Price of the complete computer system is $300,415

The Revenue/saving and cost information

Problem :

Determine the book value of the computer system after 3 years considering the following strategies/purposes:

A) Appraise the computer system by the current owner (seller)

B) Appraise the computer system by a buyer

C) File a tax return for the year 2016

Year Monthly Saving/Revenue Total Monthly Cost 2013 $93,200 $74,100 2014 $94,000 $74,000 2015 $93,000 $74,200

Explanation / Answer

A. Depreciation each year will be:- 1200000/6 = 200000

Depreciation for 3 years will be 200000*3 = 600000

Book value will be 1200000-600000 = 600000

B. Depreciation each year will be = (1200000-300415)/6 = 149930

Depreciation for 3 years = 449792

Book Value = 1200000-449792 = 750207

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