Chapter 9, Problem 1ST

To determine

Calculate the book value.

Explanation of Solution

Time period is denoted by n and interest rate is denoted by i. Book value can be calculated as follows.

$\begin{array}{c}\text{Book value}=\text{price}-\text{number of years}\left(\frac{\text{price}-\text{salvage value}}{\text{depreciation period}}\right)\\ =\text{45,000}-\text{2}\left(\frac{\text{45,000}-5,000}{\text{4}}\right)\\ =25,000\end{array}$

Book value is 25,000.  Thus, option ‘d’ is correct.