Name: 4. The results of accelerated tests showed that the average useful life of
ID: 2590834 • Letter: N
Question
Name: 4. The results of accelerated tests showed that the average useful life of most laptops in a years and have a $50 salvage value at the end of year 3. A company is tryin their laptops have depreciated. According to the straight line (SL) depreciation me year old laptop has a book value of $300. The double declining balance (DDB) depreciation g to evaluate how much thod, a 2- lues the same laptop at $88.89 and the modified accelerated cost recovery system (MACRS) values at $177.76 a. Determine the first cost of the laptop. val b. Depreciation rate for the MACRS with n-3 is 33.33% in year 1, 44.45% in year 2, and 14.81% in year 3, Determine the book value in year 3 (BV) for SL, DDB, and MACRS, and compare with the salvage value. Explain the reason for difference, if any. c. If laptops are taxable, which depreciation method is more appropriate? Why?Explanation / Answer
SL
DDB
MARCS
33.33%
66.66%
Op. value
$900
$900
$900
Salvage Value
$50
$50
$50
After Dep.
$850
$850
yr. 1
$ 283.31
$599.94
$ 283.31
yr. 2
$283.31
$ 200.02
$ 377.83
yr. 3
$ 283.31
$66.69
$ 125.89
$849.92
$866.65
$787.02
Dep.
$50.09
$33.35
$ 112.99
Dep. as was given in quest
$300
$88.89
$177.76
Double Declining Depriciation is most appropriate and first is $900
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SL
DDB
MARCS
33.33%
66.66%
Op. value
$900
$900
$900
Salvage Value
$50
$50
$50
After Dep.
$850
$850
yr. 1
$ 283.31
$599.94
$ 283.31
yr. 2
$283.31
$ 200.02
$ 377.83
yr. 3
$ 283.31
$66.69
$ 125.89
$849.92
$866.65
$787.02
Dep.
$50.09
$33.35
$ 112.99
Dep. as was given in quest
$300
$88.89
$177.76
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