Question

A high-precision programmable router for shaping furniture components is purchased by Henredon for $165,000. It is expected to last 12 years and have a salvage value of $5,000. Calculate the depreciation deduction and book value for each year.


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Part a

Use declining balance depreciation using a rate that ensures the book value equals the salvage value.

EOY	Depreciation Deduction	Book Value
0
1	$enter a dollar amount	$enter a dollar amount
2	$enter a dollar amount	$enter a dollar amount
3	$enter a dollar amount	$enter a dollar amount
4	$enter a dollar amount	$enter a dollar amount
5	$enter a dollar amount	$enter a dollar amount
6	$enter a dollar amount	$enter a dollar amount
7	$enter a dollar amount	$enter a dollar amount
8	$enter a dollar amount	$enter a dollar amount
9	$enter a dollar amount	$enter a dollar amount
10	$enter a dollar amount	$enter a dollar amount
11	$enter a dollar amount	$enter a dollar amount
12	$enter a dollar amount	$enter a dollar amount

Carry all interim calculations to 5 decimal places and then round your final answer to the nearest dollar.

Answer 1

Rate of Depreciation can be calculated using the formula:

Rate of Depreciation = 1 - (s/c)^1/n

Where,

s = scrap Value

c = Book Value at the beginning

n = number of years

Thus, rate of Depreciation = 1 - (5000/165000) ^1/12

= 25.28%

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