A surface mount placement machine is being purchased for $1548000; it has an est
ID: 2535439 • Letter: A
Question
A surface mount placement machine is being purchased for $1548000; it has an estimated useful life of 8 years and a salvage value of $70000 at that time. Determine the depreciation allowance for the 5th year and the book value at the end of the 5th year using SLN.
d5 = $
B5 = $
A surface mount placement machine is being purchased for $1419000; it has an estimated useful life of 8 years and a salvage value of $55200 at that time. Determine the depreciation allowance for the 5th year and the book value at the end of the 5th year using Declining Balance where the depreciation rate is determined by the salvage value and time in service.
what is the depreciation rate? %
d5 = $
B5 = $
A surface mount placement machine is being purchased for $1773000; it has an estimated useful life of 8 years and a salvage value of $81400 at that time. Determine the depreciation allowance for the 5th year and the book value at the end of the 5th year using Double Declining Balance.
what is the depreciation rate? %
d5 = $
B5 = $
Explanation / Answer
1. Cost of machine = $1548000
Useful life = 8 years
Salvage value = $70000
Depreciation by SLM method = (Cost of machine - Salvage value) / Useful life
= ($1548000 - $70000) / 8
= $1478000 / 8
= $184750 Depreciation for year 1
Depreciation for 5th year = $184750
Book value at end of 5th year = Cost of machine - total depreciation for 5 years
= $1548000 - $923750
= $624250
2. Cost of machine =$1419000
Useful life = 8 years
Salvage value = $55200
Depreciation = (Cost of machine - salvage life) / 8
= ($1419000 - $55200) / 8
= $1363800 / 8
= $170475
Depreciation rate = $170475 / $1363800 x 100
= 0.125 x 100
= 12.5 %
Depreciation for Year 1 = $170475
Book value at the end of year 1 = $1193325
Year 2 = 12.5% x $1193325
= 149165.625
Book value at the end of year 2 = 1044159.375
Depreciation for the year 3 = 130519.921875
Book value at the end of year 3 = 913639.45313
Depreciation for the year 4 = 114204.931641
Book value at the end of year 4 = 799434.521489
Depreciation for the year 5 = 99929.3 99929.3151861
Book value at the end of year 5 = 699505.2 (699505.206303) Rounded off
3. Cost of machine = $1773000
Useful life = 8 years
Salvage value = $81400
Depreciation = ($1773000 - 81400) / 8
= $211450
Depreciation rate = 211450 / 1691600
= 12.5%
Double Declining Depreciation rate = 12.5% x 2
= 25%
Depreciation for Year 1 = 1691600 x 25%
= $422900
Book value at the end of Year 1 = $1268700
Depreciation for Year 2 = $317175
Book value at the end of Year 2 = $951525
Depreciation for Year 3 = $237881.25
Book value at the end of Year 3 = $713643.75
Depreciation for Year 4 = $178410.9375
Book value at the end of Year 4 = 535232.8125
Depreciation for the Year 5 = 133808 (133808.203125) Rounded off
Book value at the end of Year 5 = 401425 (401424.609375) Rounded off
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