Book Value Calculation – MCQ

Practice Question

Intro to Financial Accounting
Long-Lived Assets
Capital Expenditures vs. Expenses
MCQs

Calculate the book value of an asset that was purchased for $10,000, has a residual value of $1,000, and has been depreciated by $4,000.

  1. $5,000
  2. $6,000
  3. $7,000
  4. $9,000
Answer +
Correct Answer: B
Explanation +

Book value is calculated as:

\[ \text{Book Value} = \text{Original Cost} - \text{Accumulated Depreciation} = 10,000 - 4,000 = \textbf{6,000} \]

The residual value of $1,000 is only used when calculating annual depreciation, not the current book value. Book value is what remains on the balance sheet after depreciation is accounted for.