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Question 14 A machine initally costing $520000 will have salvage value of $2000 after a 6...

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

Solutions

Expert Solution

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

Excel Formulas:


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