Question
The results of accelerated tests showed that the average useful life of most laptops is 3...
The results of accelerated tests showed that the average useful life of most laptops is 3 years, and have a $50 salvage value at the end of year 3. A company is trying to evaluate how much their laptops have depreciated. According to the double-declining balance (DDB) depreciation method, a 2-year old laptop has a book value of $100. Determine the first cost of the laptop.
Homework Answers
Answer #1
| Year | Depreciation rate | Depreciation | Book value |
| 0 | |||
| 1 | 2/3 | ||
| 2 | 2/3 | $ 100 | |
| 3 | 2/3 | $ 50 | $ 50 |
Let us assume the price of laptop = $ I
Book value at the end of year 2 = $ 100
Book value after 2 years can be determined using the following formula
First cost of laptop = $ 900
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