Problem B: Your company purchased a barge for $200,000. This barge has a salvage

Question

Problem B: Your company purchased a barge for $200,000. This barge has a salvage value of $50,000 at the end of its 10 year life. 2. What is the annual depreciation allowance for the barge using straight-line depreciation a. $10,000 b. $16,000 c. $15,000 d. $11,080 3. What is the book value of the barge at the end of year 2 using straight-line depreciation? a. $170,000 b. $160,000 c. $148,200 d. $110,260 4. What is the depreciation for year 1 using Double Declining Balance Method? a. $20,000 b. $40,000 c. $60,000 d. $80,000

Explanation / Answer

2. straight line(SL) depreciation rate = (initial cost-salvage value)/useful life= (200000-50000)/10 = $15000

C. $15000

3. book value after 2 years SL depreciation = initial value-2*SL depreciation = 200000-2*15000 = 170000

a. $170000

4. SL depreciation rate = 1/useful life = 1/10 = 10%

Double declining balance depreciation = 2*SL depreciation rate*initial cost = 2*0.1*200000 = 40000

b. $40000

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