Since I wasn't able to access the question I'm going to assume the following starting parameters:
-The book value of the equipment is equal to 130000 - 12,000 (# years) .
a) This implies the starting cost of the equipment must be $130,000, this represents the purchase price.
b) Useful life is not shown but I will assume it as 10 years
Salvage Value = 130,000 - 12,000(10 years) = $10,000. This represents how much you could sell the asset for after owning it for 10 years, in other words what's left of value after the useful life is exhausted
c) Book Value in year 4- We need to plug in y = 4;
BV = 130000 - 12,000 (4) = 130,000 - 48,000 = $82,000
d) Book Value in year 6 - We need to plug in y=6
BV = 130000 - 12000 (6) = 130000 - 72000 = $58,000
e) This is an example of extrapolation since we applying the same depreciation expense each year
f) The correct interpretation of 12,000 in this problem is that this is the annual depreciation expense.
g) To find y such that the Book Value is 70,000 we set up an equation
70,000 = 130,000 - 12,000(y)
-60,000 = -12,000y
y = 5. The Book Value of the equipment will be $70k after 5 years.
