Tory Enterprises pays $241,800 for equipment that will last five years and have
ID: 2480385 • Letter: T
Question
Tory Enterprises pays $241,800 for equipment that will last five years and have a $45,300 salvage value. By using the equipment in its operations for five years, the company expects to earn $90,200 annually, after deducting all expenses except depreciation. (Round your answers to the nearest whole dollar.)
Tory Enterprises pays $241,800 for equipment that will last five years and have a $45,300 salvage value. By using the equipment in its operations for five years, the company expects to earn $90,200 annually, after deducting all expenses except depreciation. (Round your answers to the nearest whole dollar.)
Explanation / Answer
As per double declining method, rate of depreciation is double the deptreciation rate calculated using straight line method of depreciation.
Straight line rate = 100 / 5 = 20%
Rate of depreciation as per double declining method = 40%
Annual Depreciation = Rate * Book Value at begining of year
Year 1 = 40% * $241800 = $96720
Year 2 = 40% * ($241800 - 96720) = $ 58032
Year 3 = 40% * ($241800 - 96720 - 58032) = $81244.80
Year 4 = 40% * ($241800 - 96720 - 58032 - 81244.80) = $48746.88
Year 5 = 40% * ($241800 - 96720 - 58032 - 81244.80 - $48746.88) = $29248.13