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A new barcode reading device has an installed cost basis of ​$21 comma 680 and an estimated service life of ten years. It will have a zero salvage value at that time. The 200​% declining balance method is used to depreciate this asset. a. What will the depreciation charge be in year ten​? b. What is the book value at the end of year nine​? c. What is the gain​ (or loss) on the disposal of the device if it is sold for ​$700 after nine ​years?

Answer :

Answer:

a. $2,910

b. $2,910

c. $2,210 loss

Explanation:

Note: See the attached excel file to see how the depreciation is calculated.

Since the useful life is 10, the normal depreciation rate is 10%. Therefore, 200% double declining depreciation rate implies 20% rate to be used (i.e. 10% * 200% = 20%).

a. What will the depreciation charge be in year ten​?

Since the salvage value at year ten is zero, the depreciation charge in year 10 is $2,910.

b. What is the book value at the end of year nine​?

The book value at the end of year nine = $2,910.

c. What is the gain​ (or loss) on the disposal of the device if it is sold for ​$700 after nine ​years

Loss = Sales proceed - book value at the end of year nine = $700 - $2,910 = 2,210 loss

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