Martha buys a duplicating machine for 20,000 with a residual value of 2,000.eestimated life is five years. calculate the book value at the end of year 1. assuming twice the straight -line rate.
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Asset value : 20 ,000
Life time = 5 years = n years
Scrap value or residual value = 2 000
Straight line depreciation rate = (20 000 - 2000) * 100 / (20 000 * 5) = 18 %
Double declining rate method :
depreciation rate : 2 * sttraight line depreciation rate = 36 %
depreciation at the end of 1 year = 36 % of 20 000 = 7 200
Value at the end of year 1 : 20 000 - 7 200 = 12 800
Life time = 5 years = n years
Scrap value or residual value = 2 000
Straight line depreciation rate = (20 000 - 2000) * 100 / (20 000 * 5) = 18 %
Double declining rate method :
depreciation rate : 2 * sttraight line depreciation rate = 36 %
depreciation at the end of 1 year = 36 % of 20 000 = 7 200
Value at the end of year 1 : 20 000 - 7 200 = 12 800
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