A surface mount placement machine is being purchased for
$1465000; it has an estimated useful life of 8 years and a salvage
value of $90400 at that time. Determine the depreciation allowance
for the 5th year and the book value at the end of the 5th year
using Declining Balance where the depreciation rate is determined
by the salvage value and time in service.
what is the depreciation rate? %
d5 =
B5 =
Straight line Depreciation = 1/8 =12.5 %
Declining balance method rate = 2 *12.5 = 25%
Depreciation charged for1st year = 1465000 *25% = $366250
Book value at end for first year= $1098750
Depreciation charged for second year = 1098750* 25% =$274687.5
Book value for 2nd year = 1098750-274687.5 = $824062.5
Depreciation for 3 rd year = 824062.5 * 25%=$ 206015.62
Book value for 3rd year = 824062.5-206015.6 = $618046.9
Depreciation for 4th year = 618046.9 *25% =$154511.7
Book value at the end of 4th year = 618046.9-154511.7 =$ 463535.1
Depreciation for 5th year = 463535.1 * 25% = $ 115883.8
Book value at the end of fifth year = $347651.3
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