In: Accounting
7-5. A new barcode reading device has an installed cost basis of $24,750 and an estimated service life of seven years. It will have a zero salvage value at that time. The 200% declining balance method is used to depreciate this asset. a. What will the depreciation charge be in year seven? b. What is the book value at the end of year six? c. What is the gain (or loss) on the disposal of the device if it is sold for $800 after six years?
Requirement a
Depreciation charge be in year seven= $ 3,287
Requirement b
book value at the end of year six= $3,287
Requirement c
Loss on sale = $ 2,487
Working
Double declining Method | ||
A | Cost | $ 24,750.00 |
B | Residual Value | $ - |
C=A - B | Depreciable base | $ 24,750.00 |
D | Life [in years] | 7 |
E=C/D | Annual SLM depreciation | $ 3,535.71 |
F=E/C | SLM Rate | 14.29% |
G=F x 2 | DDB Rate | 28.57% |
Depreciation schedule-Double declining | |||||
Year | Beginning Book Value | Depreciation rate | Depreciation expense | Accumulated Depreciation | Ending Book Value |
1 | $ 24,750.00 | 28.57% | $ 7,071 | $ 7,071 | $ 17,679 |
2 | $ 17,678.57 | 28.57% | $ 5,051 | $ 12,122 | $ 12,628 |
3 | $ 12,627.55 | 28.57% | $ 3,608 | $ 15,730 | $ 9,020 |
4 | $ 9,019.68 | 28.57% | $ 2,577 | $ 18,307 | $ 6,443 |
5 | $ 6,442.63 | 28.57% | $ 1,841 | $ 20,148 | $ 4,602 |
6 | $ 4,601.88 | 28.57% | $ 1,315 | $ 21,463 | $ 3,287 |
7 | $ 3,287.06 | 28.57% | $ 3,287 | $ 24,750 | $ 0 |
Cost | $ 24,750 |
Accumulated depreciation | $ 21,463 |
Book value | $ 3,287 |
Sales price | $ 800 |
Book value | $ 3,287 |
Gain /(loss) | $ (2,487) |