Question

In: Economics

A machine that cost SAR 320,000 is owned by a cement factory. Salvage is estimated at...

A machine that cost SAR 320,000 is owned by a cement factory. Salvage is estimated at SAR 75,000.
Compare book values for MACRS, DB (20%), DDB and standard SL depreciation over a 7-year recovery
period.

Solutions

Expert Solution

SL depreciation expense per year = $ 35,000

The book value of the machine over the useful life of the asset is calculated as follows

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Double declining rate = 40%

Double declining balance depreciation method
Year Book value at the beginning of the year Depreciation rate per year Depreciation Book value at the end of the year
1 320000 40.00% 128000 192,000
2 192,000 40.00% 76800 115,200
3 115,200 40.00% 46080 69,120

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