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If the book value of a certain piece of equipment was $5,000 exactly
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23 May 2020, 08:39
23 May 2020, 08:39
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If the book value of a certain piece of equipment was $5,000 exactly 5 years ago, what is its present book value?
(1) From the time the piece of equipment was purchased, its book value decreased by 10 percent of its purchase price each year of its life.
(2) The present book value of another piece of equipment is $2,000.
ID: 700120
DS20413
(1) From the time the piece of equipment was purchased, its book value decreased by 10 percent of its purchase price each year of its life.
(2) The present book value of another piece of equipment is $2,000.
ID: 700120
DS20413
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Re: If the book value of a certain piece of equipment was $5,000 exactly
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Updated on: 25 May 2020, 09:53
Updated on: 25 May 2020, 09:53
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Bunuel wrote:
If the book value of a certain piece of equipment was $5,000 exactly 5 years ago, what is its present book value?
(1) From the time the piece of equipment was purchased, its book value decreased by 10 percent of its purchase price each year of its life.
(2) The present book value of another piece of equipment is $2,000.
DS20413
(1) From the time the piece of equipment was purchased, its book value decreased by 10 percent of its purchase price each year of its life.
(2) The present book value of another piece of equipment is $2,000.
DS20413
Given: The book value of a certain piece of equipment was $5,000 exactly 5 years ago
Target question: What is its present book value?
Statement 1: From the time the piece of equipment was purchased, its book value decreased by 10 percent of its PURCHASE PRICE each year of its life.
The key concept here is that the book value need not be equal to be purchase price.
For example, it could be the case that the original book value was $5,000, but the PURCHASE PRICE was $1.
So, even though the book value (5 years ago) was $5000, we have no idea what the actual PURCHASE PRICE was.
Since the book value decreases by 10% of the PURCHASE PRICE, there's no way to calculate the present book value
Statement 1 is NOT SUFFICIENT
Statement 2: The present book value of another piece of equipment is $2,000
The book value of a different piece of equipment will certainly not help us answer the target question
Statement 2 is NOT SUFFICIENT
Statements 1 and 2 combined
Since statement 2 is totally irrelevant, the combined statements for also NOT SUFFICIENT
Answer: E
Cheers,
Brent
Originally posted by BrentGMATPrepNow on 23 May 2020, 10:37.
Last edited by BrentGMATPrepNow on 25 May 2020, 09:53, edited 1 time in total.
Last edited by BrentGMATPrepNow on 25 May 2020, 09:53, edited 1 time in total.
General Discussion
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Re: If the book value of a certain piece of equipment was $5,000 exactly
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23 May 2020, 09:55
23 May 2020, 09:55
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IMO E
Statement 1: From the time the piece of equipment was purchased, its book value decreased by 10 percent of its purchase price each year of its life.
We only know 5000 was the value of that equipment piece, nothing mentioned regarding it being its price value or not. And since depreciation is done on purchase price. We can't put depreciation on the book as per the information given.
(Insufficient)
Statement 2: The present book value of another piece of equipment is $2,000.
No information regarding whether they both are similar or depreciation put forward is same. (Insufficient)
1&2 together: the depreciation on purchase price and the present book value of other equipment is of no use in determining book value of equipment now.
Posted from my mobile device
Statement 1: From the time the piece of equipment was purchased, its book value decreased by 10 percent of its purchase price each year of its life.
We only know 5000 was the value of that equipment piece, nothing mentioned regarding it being its price value or not. And since depreciation is done on purchase price. We can't put depreciation on the book as per the information given.
(Insufficient)
Statement 2: The present book value of another piece of equipment is $2,000.
No information regarding whether they both are similar or depreciation put forward is same. (Insufficient)
1&2 together: the depreciation on purchase price and the present book value of other equipment is of no use in determining book value of equipment now.
Posted from my mobile device
