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 fort = 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. Using your table. answer the following questions, formatting your answers without symbols or decimal places but with comma separators (ex 999, 999) What is the book value in year 5 using double declining balance?

Explanation / Answer

Answer:

Streight Line Method: Year Cash flows Depreciation Book Value 0 400000 0 400000 1 400000 60000 340000 2 340000 60000 280000 3 280000 60000 220000 4 220000 60000 160000 5 160000 60000 100000 6 100000 60000 40000 Double Declining Method Annual Depreciation under Streight line method 60000 %age of Depreciation under streight line method 15.00% (60000/400000 x 100) So percentage under Double declining method = 15 x 2 = 30% Year Cash flows Depreciation Book Value 0 400000 0 400000 1 400000 120000 280000 2 280000 84000 196000 3 196000 58800 137200 4 137200 41160 96040 5 96040 28812 67228 6 67228 20168.4 47059.6 Answer: Book value after 5 year using Double declining Method is $67,228.00

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