In: Finance
Question 14
A machine initally costing $520000 will have salvage value of $2000
after a 6 year life. using double declining balance depreciation
what will the book value be after the third year
Cost | 520,000 |
Useful life | 6 |
Salvage | 2,000 |
Rate | 33.33% |
Calculation of rate in double declining balance method:
Therefore, substituting the values, we get.
OR
Year | Opening Book Value | Rate | Depreciation | Closing Book Value |
1 | 520,000.00 | 33.33% | 173,316.00 | 346,684.00 |
2 | 346,684.00 | 33.33% | 115,549.78 | 231,134.22 |
3 | 231,134.22 | 33.33% | 77,037.04 | 154,097.19 |
4 | 154,097.19 | 33.33% | 51,360.59 | 102,736.59 |
5 | 102,736.59 | 33.33% | 34,242.11 | 68,494.49 |
6 | 68,494.49 | - | 66,494.49 | 2,000.00 |
From above table, we can see that book value after 3 years is $154,097.19
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