Question

Problem 2 (10 pts) A new press brake costs York Steel $780 000. It is expected to last 20 years, with a $60 000 salvage value. What rate of depreciation for the declining-balance method will produce a book value after 20 years that equals the salvage value of the press?

Answer 1

Solution : Lets assun balance methe Original Price = $780,000 Salvage Value = $ 60,000 assume that asset is depreciated as declining lance method at a rate of 2% per annum to that me book value remains $ 60,000 after 20 years. So Each year the book value of asset will become Cl-x%) of the opening balance. Thus 60,000 = 780.000 x(1-x%) *C)-2%)*(1-2).... upto 20 year 60,000 = 780,000 (1-27). Solving this for a 20 60,000 C1-2%) 780,000 (1-2 = 0.07692 Cl-ex) 2 0.07692 (1-x²) = 200.07692 (1-2%) = (0.87692) 20 [ 1-28.) = 0.8796 x% = 1-0.8796 xt = 0.120364 2 12.0364% 12.04 %.