The following are the cost of a system and the useful life is five years. The salvage value for depreciation purpose is equal to 25% of the hardware cost Item Hardware Training Installation Cost $170,000 $18,000 $18,000 a) What is the book value of the system at the end of year three if Straight line method is used? b) Suppose that after depreciation of the system for two years with straight line, the company decides to switch to the decline method for the reminder of the system life (depreciation rate 30%). What is the system Book Value at the end of four years?

The following are the cost of a system and the useful life is five years. The salvage value for depreciation purpose is equal to 25% of the hardware cost Item Hardware Training Installation Cost $170,000 $18,000 $18,000 a) What is the book value of the system at the end of year three if Straight line method is used? b) Suppose that after depreciation of the system for two years with straight line, the company decides to switch to the decline method for the reminder of the system life (depreciation rate 30%). What is the system Book Value at the end of four years?

Fundamentals Of Construction Estimating

4th Edition

ISBN:9781337399395

Author:Pratt, David J.

Publisher:Pratt, David J.

Chapter9: Pricing Construction Equipment

Section: Chapter Questions

Problem 8RQ

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Concept explainers

Tax Significance of Depreciation

While calculating taxes, depreciation is the method used to allocate the cost of a tangible or immovable asset over the useful life of an asset. In other words, allocate part of that cost to the times when tangible assets help generate revenue or sales. By recording the depreciation of an asset, depreciation reduces the amount of taxes a company or business pays in tax deductions.

Question

The following are the cost of a system and the useful life is five years. The
salvage value for depreciation purpose is equal to 25% of the hardware
cost
Item
Hardware
Training
Installation
Cost
$170,000
$18,000
$18,000
a) What is the book value of the system at the end of year three if Straight line
method is used??
b) Suppose that after depreciation of the system for two years with straight
line, the company decides to switch to the decline method for the reminder of
the system life (depreciation rate 30%). What is the system Book Value at the
end of four years?

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