Question

An equipment having a first cost of 450000 pesos has a life expectancy of 10 years with final salvage value of P80000. Using the double-declining balance method, what is its book value after 6 years?

Answer 1

Answer:

Book value at end of Year 6 = 153,180.37 pesos

Explanation:

Provided cost of asset = 450,000 pesos

Salvage value = 80,000 pesos

Straight line depreciation with life of 10 years  $\frac{450,000-80,000}{10} = 37,000$

Depreciation rate = $\frac{37,000}{450,000} \times 100 = 8.22%$

Rate of depreciation under double declining method = 8.22 $\times$ 2 = 16.44%

Thus,

Value at end of

Year 1 = 450,000 - 16.44% = $376,020

Year 2 = 376,020 - 16.44% = $314,202.312

Year 3 = 314,202.312 - 16.44% = 262,547.452

Year 4 = 262,547.452 - 16.44% = 219,384.65

Year 5 = 219,384.65 - 16.44% = 183,317.814

Year 6 = 183,317.814 - 16.44% = 153,180.37

Thus, book value at end of Year 6 = 153,180.37 pesos