Assement of present value of an asset

S.N item Purchasing Purchasing Usefu salvag Actual Remaining

o cost/ year/ l life e Age life
constructio constructio
n cost n year
Power 5000 2019 5 200 1 4
spraye
r

Calculation of present value of power sprayer in 2020

There are two methods engaged for calculation of present value

Method 1:

Present value of the asset =

Purchasing cost (or) construction cost – (Depreciation X actual life of the asset)

Method 2:
Present value of the asset = (Depreciation X Reaming life of the asset) + salvage

Method1:

Procedure:

Step 1: calculate depreciation by straight line method by using the formula

Depreciation D = C ---S / N

Where

C Purchasing cost/ construction cost of the asset

S Salvage of the asset

N Useful life of asset

C= 5000 Depreciation amount = 5000-200 / 5

S= 200 = 960

N= 5

Step 2: calculate present value by using the formula

Present value (2020) = Purchasing cost (or) construction cost – (Depreciation X actual life of the asset)

= 5000 – (960 X 1)

= 4040
Method 2:

Procedure:

Step 1: calculate depreciation by straight line method by using the formula

Depreciation = C ---S / N

Where

C Purchasing cost/ construction cost of the asset

S Salvage of the asset

N Useful life of asset

C= 5000 Depreciation = 5000-200 / 5

S= 200 = 960

N= 5

Step 2: calculate present value by using the formula

Present value (2020) = (Depreciation amount X Reaming life of the asset) + salvage

= (960 X 4) + 200

= (3840) + 200

= 4040