Activity A1 takes 5 weeks, A2 takes 7 weeks, and A3 takes 4 weeks with a 50% probability and 10 weeks with a 50% probability. Wh
1 answer:
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Answer:
a) $543.75
b) $1,903.20
c) $1,403.2 (loss)
Explanation:
Data provided in the question:
Cost basis for the device = $20,060
Useful life = 7 years
Salvage value = $0
Now,
Using the 200% declining balance method,
Rate of depreciation =
or
Rate of depreciation =
or
Rate of depreciation = 0.2857 per year or 28.57% per year
Now,
Book value at the end of first year
= $20,060 - 0.2857 × $20,060
= $14,328.57
Book value at the end of second year
= $14,328.57 - 0.2857 × $4093.67
= $10234.9
Book value at the end of third year
= $10234.9 - 0.2857 × $10234.9
= $7310.78
Book value at the end of fourth year
= $7310.78 - 0.2857 × $7310.78
= $5222.08
Book value at the end of fifth year
= $5222.08 - 0.2857 × $5222.08
= $3730.13
Book value at the end of fifth year
= $3730.13 - 0.2857 × $3730.13
= $2664.43
Book value at the end of sixth year
= $2664.43 - 0.2857 × $2664.43
= $1903.20
Therefore,
a) The depreciation charge in the year 7 will be
= 0.2857 × $1903.20
= $543.75
b) Book value at the end of year six = $1,903.20
c) The loss on the disposal of the device after six year for $500
= Selling cost - Book value
= $500 - $1,903.20
= -$1,403.2 [Here, negative sign means loss]