answer to the net book value exercise
Net book value = cost less accumulated depreciation.
accumulated depreciation = the total of each years depreciation
charge in the profit and loss account for that fixed asset.
Total depreciation charge for four years = £1,500 x 4 = 6,000
Net book value is therefor equal to £10,000 - 6,000 = £4,000
Net book value is an accounting value for a fixed asset. It represents
the initial cost or valuation of the asset being reduced by the measure
of it's wearing out. It is not a selling value which would merely reflect
the price a buyer might be willing to pay for it. It is also not to be
mistaken for replacement value of a fixed asset which is expected to be
much higher than the net book value.
The higher the net book value the less depreciation has been deducted
which indicates that the asset is considered not much worn out.
return to net book value