Question
In: Economics
A piece of equipment costs $18,000 to purchase. It has a useful life of 7years and...
A piece of equipment costs $18,000 to purchase. It has a useful life of 7years and will be worth$1,300
at the end of the useful life. Assume you depreciate the equipment with the 200%Declining Balance (DB) method
What is the cummulative depreciation incurred through year six?
A.16,420
B.16,292
C.16,737
D.15,609
What is the Book Value at the end of year
six?.
A. $1,708.
B. $2,563.
C.$1,580.
D.$2,391.
Solutions
Expert Solution
Answer 1.
The correct answer is Option (D) 15,609
Answer 2.
The correct answer is Option (D) $2,391
Explanation -
Straight-line Depreciation Percentage = 100 / Asset Life = 100 / 7 = 14.29%
Double Declining Percentage = 14.29 * 2 = 28.57%
Therefore,
Depreciation in Year 1 = 18000 * 28.57% = $5143
Book Value at end of Year 1 = 18000 - 5143 = $12,857
Depreciation in Year 2 = 12857 * 28.57% = $3673
Book Value at end of Year 2 = 12857 - 3673 = $9184
Depreciation in Year 3 = 9184 * 28.57% = $2624
Book Value at end of Year 3 = 9184 - 2624 = $6560
Depreciation in Year 4 = 6560 * 28.57% = $1874
Book Value at end of Year 4 = 6560 - 1874 = $4686
Depreciation in Year 5 = 4686 * 28.57% = $1339
Book Value at end of Year 5 = 4686 - 1339 = $3347
Depreciation in Year 6 = 3347 * 28.57% = $956
Book Value at end of Year 6 = 3347 - 956 = $2,391
Accumulated Depreciation Through Year 6 = 5143 + 3673 + 2624 + 1874 + 1339 + 956
Accumulated Depreciation Through Year 6 = $15,609
Rahul Sunny answered 10 months agoRelated Solutions
A company buys a piece of equipment for $62,000. The equipment has a useful life of...
A company buys a piece of equipment for $62,000. The equipment
has a useful life of five years. No residual value is expected at
the end of the useful life. Using the double-declining-balance
method, what is the company's depreciation expense in the first
year of the equipment’s useful life? (Do not round
intermediate calculations)
$12,400.
$24,800.
$15,500.
$31,000.
An asset is purchased on January 1 for $47,200. It is expected
to have a useful life of four years after which...
Pebble Beach Co. buys a piece of equipment for $68,000. The equipment has a useful life...
Pebble Beach Co. buys a piece of equipment for $68,000. The
equipment has a useful life of five years. No residual value is
expected at the end of the useful life. Using the
double-declining-balance method, what is the company's depreciation
expense in the first year of the equipment’s useful life?
(Do not round intermediate calculations.)
Multiple Choice
$27,200
$17,000
$34,000
$13,600
Co. is considering purchasing a piece of equipment costing $300,000. It has a useful life of...
Co. is considering purchasing a piece of equipment costing
$300,000. It has a useful life of 3 years and will be depreciated
straight-line to zero, after which it will be scrapped for $20,000.
This piece of equipment will save Teer Co. $125,000 per year in
pretax operating costs during its useful life but requires an
initial investment in NWC of $50,000. Teer Co. has a 20% tax rate
and a required rate of return of 10%.
What is the annual...
A piece of equipment has a first cost of $60000, a maximum useful life of 4...
A
piece of equipment has a first cost of $60000, a maximum useful
life of 4 years, and a market (salvage) value described by the
relation Sk = 48000 – 8400k, where k is the number of years since
it was purchased. The AOC series is estimated using AOC = 24000 +
3600k. The interest rate is 9% per year. When should the company
replace this asset?
A piece of equipment has a first cost of $160,000, a maximum useful life of 7...
A piece of equipment has a first cost of $160,000, a maximum
useful life of 7 years, and a market (salvage) value described by
the relation S = 120,000 – 17,000k, where k is the number of years
since it was purchased. The salvage value cannot go below zero. The
AOC series is estimated using AOC = 60,000 + 11,000k. The interest
rate is 11% per year. Determine the economic service life and the
respective AW.
The economic service life...
You are considering the acquisition of a new piece of equipment with a useful life of...
You are considering the acquisition of a new piece of equipment
with a useful life of five years. This new technology will make
your clinical operation more efficient and allow for a reduction of
10 FTEs. The equipment purchase price is $4,500,000 plus 10%
installation fee. The purchase price includes service for the first
year, an item that has an annual cost of $10,000. There is a
potential for additional volume of 150,000 units in the first year,
growing by...
You are considering the acquisition of a new piece of equipment with a useful life of...
You are considering the acquisition of a new piece of equipment
with a useful life of five years. This new technology will make
your clinical operation more efficient and allow for a reduction of
10 FTEs. The equipment purchase price is $4,500,000 plus 10%
installation fee. The purchase price includes service for the first
year, an item that has an annual cost of $10,000. There is a
potential for additional volume of 150,000 units in the first year,
growing by...
A piece of equipment used in a manufacturing plant that costs 220,000 to purchase has the...
A piece of equipment used in a manufacturing plant that costs
220,000 to purchase has the economic data shown in the table below
including the market value if the equipment was sold at the end of
the period of use. Apply an interest rate of 9.0% to answer the
questions that follow the data.
Period
1
2
3
4
5
Operating Cost
45,000
56,000
70,000
85,000
98,000
Market Value
160,000
125,000
105,000
45,000
15,000
a. What is the period cost...
Needed Information: -The equipment has an estimated useful life of 13 years. -There is no purchase...
Needed Information:
-The equipment has an estimated useful life of 13 years.
-There is no purchase option. Transfer of ownership to Michael is
not stipulated in the lease contract.
-The fair value to Thomas (lessor) at the inception of the lease
was $4,000,000. Lessor's cost was $3,775,000. Sales
commissions were $2,500.
-Michael's incremental borrowing rate is 10%. The implicit annual
rate in the lease (known to Michael) is 8%.
- Michael and Thomas use straight-line depreciation.
-The lease requires rental...
A hospital is considering the purchase of a piece of medical equipment that costs $1,500,000 and...
A hospital is considering the purchase of a piece of medical
equipment that costs $1,500,000 and has a useful life of five years
and no salvage value at the end of its useful life. The equipment
generates revenues of $650,000 per year and operating expenses of
$300,000. Calculate NPV, payback, BCR, and IRR, should the
equipment be purchased if the discount rate is 6% or 10%?
Revenue Expense
Year 0 -
$1,500,000 (investment)
...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- On January 1, 2018 you bought a zero coupon bond with 5 years to maturity at...
- indifference curves
- The federal dependent coverage mandate (FDCM) allows young adults to stay on family/parent health insurance plans...
- What was the effect of 1989 on Central and Eastern Europe?
- What do you think intelligence is? Sternberg makes a division between operational and real definitions. The...
- 2. Using Marx’s theory of competition do you think that the U.S. is competitive or is...
- . If someone asked you does the rate of profit tend to fall under capitalism, what...
ADVERTISEMENT