Question

1. An asset costs $14 000. At a depreciation rate of 20 percent, calculate its book value using the declining-balance method.

Q8 ANSWER:

a) After one year ( 3 points)

……………..= ………………………….. = …………….

b) After four years ( 3 points)

……………..= ………………………….. = …………….

c) After seven years ( 3 points)

……………..= ………………………….. = …………….

Answer 1

8.a) Ans: Book value after 1 year = ( 1- 0.20)¹ * $14000 = 0.8 * $14000 = $11200

b) Ans: Book value after 4 year = ( 1- 0.20)⁴ * $14000 = 0.4096 * $14000 = $5734.40

c) Ans: Book value after 7 year = ( 1- 0.20)⁷ * $14000 = 0.209715 * $14000 = $2936.01

Explanation:

Book value ;  B_t = (1 -K)^t * P

End of the year	Depreciation Amount = 0.20 * Previous year book value	Book Value = Previous year book value - Current year depreciation amount
0		14000.00
1	2800.00	11200.00
2	2240.00	8960.00
3	1792.00	7168.00
4	1433.60	5734.40
5	1146.88	4587.52
6	917.50	3670.02
7	734.00	2936.01