7. Cisco Systems is purchasing a new bar code scanning device for its service center inSan Francisco. The table that follows lists the relevant cost items for this purchase. Theoperating expenses for the new system are $10,000 per year, and the useful life of thesystem is expected to be five years. The SV for depreciation purposes is equal to 25% ofthe hardware cost.Cost$160,000$15,000$15,000Cost ItemHardwareTrainingInstallationa. What is the BV of the device at the end of year three if the SL depreciation method isused?b. Suppose that after depreciating the device for two years with the SL method, the firmdecides to switch to the double declining balance depreciation method for the remainderof the device's life (the remaining three years). What is the device's BV at the end of fouryears?

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Description: 7. Cisco Systems is purchasing a new bar code scanning device for its service center inSan Francisco. The table that follows lists the relevant cost items for this purchase. Theoperating expenses for the new system are $10,000 per year, and the usef

Depreciation is an important aspect of Accounting.It is process wherein value of an asset deplets…

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7. Cisco Systems is purchasing a new bar code scanning device for its service center in San Francisco. The table that follows lists the relevant cost items for this purchase. The operating expenses for the new system are $10,000 per year, and the useful life of the system is expected to be five years. The SV for depreciation purposes is equal to 25% of the hardware cost. Cost Item Hardware Training Installation Cost $160,000 $15,000 $15,000 a. What is the BV of the device at the end of year three if the SL depreciation method is used? b. Suppose that after depreciating the device for two years with the SL method, the firm decides to switch to the double declining balance depreciation method for the remainder of the device's life (the remaining three years). What is the device's BV at the end of four years?

7. Cisco Systems is purchasing a new bar code scanning device for its service center in San Francisco. The table that follows lists the relevant cost items for this purchase. The operating expenses for the new system are $10,000 per year, and the useful life of the system is expected to be five years. The SV for depreciation purposes is equal to 25% of the hardware cost. Cost Item Hardware Training Installation Cost $160,000 $15,000 $15,000 a. What is the BV of the device at the end of year three if the SL depreciation method is used? b. Suppose that after depreciating the device for two years with the SL method, the firm decides to switch to the double declining balance depreciation method for the remainder of the device's life (the remaining three years). What is the device's BV at the end of four years?

FINANCIAL ACCOUNTING

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ISBN:9781259964947

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Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Concept explainers

Depreciation Methods

The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.

Depreciation Accounting

In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.

Topic Video

Question

7. Cisco Systems is purchasing a new bar code scanning device for its service center in
San Francisco. The table that follows lists the relevant cost items for this purchase. The
operating expenses for the new system are $10,000 per year, and the useful life of the
system is expected to be five years. The SV for depreciation purposes is equal to 25% of
the hardware cost.
Cost
$160,000
$15,000
$15,000
Cost Item
Hardware
Training
Installation
a. What is the BV of the device at the end of year three if the SL depreciation method is
used?
b. Suppose that after depreciating the device for two years with the SL method, the firm
decides to switch to the double declining balance depreciation method for the remainder
of the device's life (the remaining three years). What is the device's BV at the end of four
years?

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