Answer:
The trade in value is higher than the book value by $ 205
Explanation:
Computation of Book value
In a double declining balance method of depreciation, the rate of depreciation is double the straight line rate and is depreciated on a declining balance.
Cost of Equipment $ 37,000
Estimated useful life ( Recovery Period) 5 years
Straight Line Depreciation rate 20 %
Double declining Method depreciation rate 40 %
Cost $ 37,000
Depreciation for year 1 at 40 % <u>$(14,800)</u>
Depreciable basis for year 2 $ 22,200
Depreciation for year 2 at40 % <u>$ ( 8,880)</u>
Depreciable basis for year 3 $ 13,320
Depreciation for year 3 at 40 % <u>$ (5,328)</u>
Depreciable basis for year 4 $ 7,992
Depreciation for year 4 at 40 % <u>$ 3,197) </u>
Depreciable basis for year 5 $ 4,795
The depreciable basis for year 5 is the net book value after 4 years
The trade value is $ 5,000
The trade in value is higher by $ 205
