Astro-Satellite aerospace company is considering buying a new advanced computer

Question

Astro-Satellite aerospace company is considering buying a new advanced computer (and peripheral equipment for 200,000. It is estimating its lifetime to be 6 years. For internal auditing purposes its salvage value will be 30,000, (a) the equipment using declining balance (DB) so that in 6 years the equipment will value equal to Salvage value. Show the book value and depreciation for each year through the 6th year. Repeat the calculation using the MACRS method (Just show the (b) depreciation in this part.) epec

Explanation / Answer

A)

Depriciation% = (200000/6)*2 = 33.33%

(NOte: Book value cannot go below declared salvage value)

B)

(Note: Salvage value is ignored in MACRS, Use MACRS table to find depricaition rates)

YEAR Depriciation Book value 0 200000 1 66660 133340 2 44442 88898 3 29630 59538 4 19754 39784 5 9784 30000 6 0 30000

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