Question

"A firm is trying to decide whether to keep an item of construction equipment for another...

"A firm is trying to decide whether to keep an item of construction equipment for another year. The firm has been using double-declining-balance (DDB) for book purposes, and this is the 3rd year of ownership of the equipment, which cost $185,000 new. The useful life of the asset is 11 years and has a salvage value of $11,000. What is the book value of the equipment at the end of year 2?"

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Cost of equipment = $185,000

Useful life = 11 years

Calculate depreciation in Year 1 -

Depreciation in Year 1 = Cost * (2/Useful life)

Depreciation in Year 1 = $185,000 * (2/11) = $185,000 * 0.1818 = $33,633

Calculate depreciation in Year 2 -

Depreciation in Year 2 = (Cost - depreciation in Year 1) * (2/Useful life)

Depreciation in Year 2 = ($185,000 - $33,633) * (2/11) = $151,367 * 0.1818 = $27,518.52

Calculate the book value in Year 2 -

Book Value = Cost - Depreciation in Year 1 - Depreciation in Year 2

Book Value = $185,000 - $33,633 - $27,518.52 = $123,848.48

The book value in Year 2 is $123,848.48

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Using the Double Declining Balance (DDB) depreciation method for equipment with an initial cost of $282,000,...
Using the Double Declining Balance (DDB) depreciation method for equipment with an initial cost of $282,000, an anticipated useful life of 10 years, and a salvage value of $35,250, calculate the (a) depreciation rate, d=?, (b) the Depreciation charge, D=?, at the end of year 2, and (c) the Book Value, BV=?, at the end of year 2.
A depreciable asset is purchased for $50,000. The expected salvage value is zero at the end...
A depreciable asset is purchased for $50,000. The expected salvage value is zero at the end of it’s 8 year useful life. Compute the depreciation schedule by using double declining balance (DDB) to switch over straight line depreciation. Also, determine the book value of the asset after 6 years.
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.
1.Which item is not a part of Noncurrent assets? A) Buildings and equipment B) Inventories C)...
1.Which item is not a part of Noncurrent assets? A) Buildings and equipment B) Inventories C) Natural resources D) Land E) Intangible assets 2. Allocation of the "basket" purchase price to the individual assets acquired is made based on: A) Their net bоok value B) Their book values at the end of the year C) Their relative appraisal values on the date of аcquisition D) Their book values at the beggining of the year E) Their unamortized value 4. The...
fill in the blank Referred to as property, plant, and equipment (PP&E); plant and equipment; and...
fill in the blank Referred to as property, plant, and equipment (PP&E); plant and equipment; and _______ ________. ___________ is the process of allocating to expense the cost of a plant asset over its useful (service) life in a rational and systematic manner to those periods expected to benefit from the use of the asset. Depreciation is an _________ . _______ _______ include land, land improvements, buildings, and equipment (machinery, furniture, tools) are resources that _______ ___ _________ - Expense...
Problems 7-12 use the following information:  A firm purchased a new piece of equipment with an estimated...
Problems 7-12 use the following information:  A firm purchased a new piece of equipment with an estimated useful life of five years.  The cost of the equipment was $55,000. The salvage value is estimated to by $5,000 at the end of year 5. Using the Double-Declining Balance method of depreciation, what is the book value for year 4? A. 2,128 B. 5,000 C. 2,851 D. 7,920 E. 7,128
A construction company is considering buying a piece of excavation equipment for $70,000 in cash, with...
A construction company is considering buying a piece of excavation equipment for $70,000 in cash, with a 5 year useful life and salvage value of $15,000. Maintenance will be $10,000 in the first year and increase 3% per year, the company has an MARR of 10%, and the effective tax rate is 30%. Assume that the company can write off depreciation (that is, these costs can be deducted from taxable income). 1.What is the book value of the asset after...
A construction company is considering buying a piece of excavation equipment for $70,000 in cash, with...
A construction company is considering buying a piece of excavation equipment for $70,000 in cash, with a 5 year useful life and salvage value of $15,000. Maintenance will be $10,000 in the first year and increase 3% per year, the company has an MARR of 10%, and the effective tax rate is 30%. Assume that the company can write off depreciation (that is, these costs can be deducted from taxable income). 1.What is the book value of the asset after...
An item of equipment acquired on January 1, at a cost of $45,000. The equipment has...
An item of equipment acquired on January 1, at a cost of $45,000. The equipment has an estimated life of three years, (45,000 hour) and an estimated salvage of $10,000. The equipment was used for the first year for 8,700 hour, for the second year for 3,300 hour and for the third year for 7,500 hour. Determine the depreciation and the book value for three years, using the declining balance method, and the units of production method.
The company is trying to decide whether to continue using old equipment to make product or...
The company is trying to decide whether to continue using old equipment to make product or replace it with new equipment that will have lower operating costs. The following information is available: The new equipment will cost $46,000. Disposal value at the end of its 6-year useful life will be $5,500. The old equipment was purchased 3 years ago for $21,000. It can be sold immediately for $10,000 but will have zero disposal value in 6 years. Maintenance work costs...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT