Home Health Care, Inc. purchased a sonogram machine for $400,000. Its functional

Question

Home Health Care, Inc. purchased a sonogram machine for $400,000. Its functional life is 6 years and its salvage value will be 10% of its purchase price. Rounding to the nearest dollar, make a table and fill in the values for t = 0, 1, 2, 3, 4, 5, 6 showing (a) year t, (b) the straight-line (SL) depreciation amount for year t, (c) the book value in year t using SL depreciation, (d) the double declining balance amount in year t, (e) the book value in year t using DDB depreciation. What is the book value in year 5 using double declining balance? $58,998 $52,683 $67,008 $64,483 $72,226 $48,906

Explanation / Answer

Straight Line Depreciation Years Purchase Amount (in $) Depreciation Amount (in $) Book Value (in $) 0 400000.00 400000.00 1 60000.00 340000.00 2 60000.00 280000.00 3 60000.00 220000.00 4 60000.00 160000.00 5 60000.00 100000.00 6 60000.00 40000.00 Double Declining Method Depreciation Years Purchase Amount (in $) Depreciation Amount (in $) Book Value (in $) 0 400000.00 400000.00 1 133333.33 266666.67 2 88888.89 177777.78 3 59259.26 118518.52 4 39506.17 79012.35 5 26337.45 52674.90 6 12674.90 40000.00 The correct option is $52,683 (difference is due to rounding off).

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