These are all in 1 question with two different parts (a and b) can you show work

Question

These are all in 1 question with two different parts (a and b) can you show working as well please.

5 (20 points) A company is considering buying a new machine. Two different models are available on the market, as shown below Data Useful Life, Years First Cost, S Salvage Value, S Model -II 25 100,000 25,000 15,000 (Years 1-20) 20,000 years 11 through 25 Model-I 20 80,000 20,000 Remark Annual Operating Costs, $ 18,000 Years I through 10, a (10 pts) Assuming straight line depreciation, what is the book value of Model-I at the end of year 6? b dopto Assuming double dec the end of year 3? lining balance depreciation, what is the book value of Model-I at Book Value S100,000 Depreciation 2

Explanation / Answer

(a) Under straight line method (SLM), Annual depreciation ($) = (Cost - Salvage value) / Useful life

= (80,000 - 20,000) / 20 = 60,000 / 20 = 3,000

Accumulated depreciation in 6 years = $3,000 x 6 = $18,000

Book value at end of year 6 ($) = Cost - Accumulated depreciation in 6 years = 80,000 - 18,000 = 62,000

(b) SLM depreciation rate = 1 / Useful life = 1 / 25 = 0.04

DDB Depreciation rate = 2 x SLM rate = 2 x 0.04 = 0.08

DDB Method ignores salvage value. Therefore,

Year Beginning-of-Year Book Value ($) Depreciation Rate Annual depreciation End-of-Year Book Value ($) 1 80,000 0.08 6,400 73,600 2 73,600 0.08 5,888 67,712 3 67,712 0.08 5,417 62,295

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.