Cisco Systems is purchasing a new bar code scanning device for its serviceCost I

Question

Cisco Systems is purchasing a new bar code scanning device for its serviceCost Item center in San Francisco. The table that on the right lists the relevant cost items for this purchase. The operating expenses for the new system are $12,000 per year, and the useful life of the system is expected to be five years. The SV for depreciation purposes is equal to 28% of the hardware cost. Cost Hardware Training Installation $160,000 $16,000 $13,000 a. What is the BV of the device at the end of year three if the SL depreciation method is used? b. Suppose that after depreciating the device for one year with the SL method, the firm decides to switch to the double declining balance depreciation method for the remainder of the device's life (the remaining four years). What is the device's BV at the end of two years? a. Using the SL depreciation method the BV of the device at the end of year three is $ 102480. (Round to the nearest dollar.) b. The device's book value at the end of year two using the method described above is $(Round to the nearest dollar.)

Explanation / Answer

1.

b)

Hardware    160,000.00 Training      16,000.00 Installation      13,000.00 Total cost    189,000.00 SV      44,800.00 Cost Net of SV    144,200.00 Depreciation for 3 Years      86,520.00 BV at the end of 3rd Year    102,480.00

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