Answer :
Answer:
a) Annual depreciation = $15,416.67
b) Depreciation rate = 0.2615
Explanation:
Data provided in the question:
Cost of router = $190,000
Useful life = 12 years
Salvage value = $5,000
Now,
a) Using straight-line depreciation
Annual depreciation = [tex]\frac{\textup{Cost - Salvage value}}{\textup{Useful life}}[/tex]
= [tex]\frac{\$190,000-\$5,000}{\textup{12}}[/tex]
= $15,416.67
Hence,
Year Depreciation Book value
1 $15,416.67 $190,000 - $15,416.67 = $174,583.33
2 $15,416.67 $174,583.33 - $15,416.67 = $159166.66
3 $15,416.67 $159166.66 - $15,416.67 = $143749.99
4 $15,416.67 $143749.99 - $15,416.67 = $128333.32
5 $15,416.67 $128333.32 - $15,416.67 = $112916.65
6 $15,416.67 $112916.65 - $15,416.67 = $97499.98
7 $15,416.67 $97499.98 - $15,416.67 = $82083.31
8 $15,416.67 $82083.31 - $15,416.67 = $66666.64
9 $15,416.67 $66666.64 - $15,416.67 = $51249.97
10 $15,416.67 $51249.97 - $15,416.67 = $35833.3
11 $15,416.67 $35833.3 - $15,416.67 = $20416.63
12 $15,416.67 $20416.63 - $15,416.67 = $4999.96
b) using declining balance depreciation
Depreciation rate = [tex]1 - (\frac{salvage}{Cost})^{\frac{1}{n}}[/tex]
here, n = useful life
thus,
Depreciation rate = [tex]1 - (\frac{5,000}{190,000})^{\frac{1}{12}}[/tex]
= 0.2615
Therefore,
Year Depreciation Book value
1 0.2615 × $190,000 $190,000 - $49685 = $140315
2 0.2615 × $140315 $140315 - $36692.3725 = $103622.62
3 0.2615 × $103622.6 $103622.62 - $27097.30 = $76525.32
4 0.2615 × $76525.32 $76525.32 - $20011.37 = $56513.95
5 0.2615 × $56513.95 $56513.95 - $14778.39 = $41735.56
6 0.2615 × $41735.56 $41735.56 - $10913.84 = $30821.72
7 0.2615 × $30821.72 $30821.72 - $8059.87 = $22761.85
8 0.2615 × $22761.85 $22761.85 - $5952.22 = $16809.63
9 0.2615 × $16809.63 $16809.63 - $4396.22 = $12413.41
10 0.2615 × $12413.41 $12413.41 - $3246.10 = $9167.31
11 0.2615 × $9167.31 $9167.31 - $2397.25 = $6770.06
12 0.2615 × $6770.06 $6770.06 - $1770.37 = $4999.69