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?

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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