A piece of equipment used for research is purchased for $945,000 and is to be de
ID: 2435356 • Letter: A
Question
A piece of equipment used for research is purchased for $945,000 and is to be depreciated over a specific period of time. If the salvage value at the end of its depreciable life is $50,000, show the yearly depreciation using:a) Straight line method (use the number of letters in your first name for the number of years…..if your first name has less than 5 letters, add 5 to it for the depreciable life)
b) Double declining balance method (use the number of letters in your first name for the number of years….. if your first name has less than 5 letters, add 5 to it for the depreciable life)
Explanation / Answer
a) Straight line method (use the number of letters in your first name for the number of years…..if your first name has less than 5 letters, add 5 to it for the depreciable life) Cost of Equipment $945,000 Less: Salvage value $ 50,000 Depreciable value $895,000 Useful life 5 years Depreciation per year $179,000 b) Double declining balance method (use the number of letters in your first name for the number of years….. if your first name has less than 5 letters, add 5 to it for the depreciable life) Cost of Equipment $945,000 Less: Salvage value $ 50,000 Depreciable value $895,000 Useful life 5 years Depreciation per year 20% Double declining method 40% Year Book Value Depreciation Depreciation Closing Book value Rate Amount 1 $945,000 40% $378,000 $567,000 2 $567,000 40% $226,800 $340,200 3. $340,200 40% $136,080 $204,120 4 $204,120 40% $81,648 $122,472 5 $122,472 40% $48,989 $ 73,483
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