ABE TUTORIALS

PROBLEM 27: SALVAGE VALUE CALCULATION

A COMPANY SPENT P420,000 TO ACQUIRE AND INSTALL A NEW MACHINE. AT THE END OF 3 YEARS, THE COMPANY HAD NO FURTHER USE FOR THE MACHINE AND HAD IT DISMANTLED AT A COST OF P9,000. THE MACHINE WAS THEN SOLD FOR P60,000. WHAT IS THE SALVAGE VALUE OF THE MACHINE?

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a. P60,000

b. P69,000

c. P51,000

d. P360,000

Correct Answer: C (P51,000)

Definition:

Salvage Value (also known as Net Salvage Value) is the amount that can be realized from the sale of an asset after deducting the costs of dismantling and removal.

Step 1: Identify Values

Selling Price = P60,000
Dismantling Cost = P9,000

Step 2: Calculate Salvage Value (SV)

SV = Selling Price - Dismantling Cost
SV = P60,000 - P9,000 = P51,000

Result: c. P51,000