A global positioning system (GPS) receiver is purchased for $3,000. The IRS informs your company that the useful (class) life of the system is seven years. The expected market (salvage) value is $200 at the end of year seven. Solve, a. Use the straight-line method to calculate depreciation in year three. b. Use the 200% declining balance method to calculate the cumulative depreciation through year four.c. Use the MACRS method to calculate the cumulative depreciation through year five. d. What is the book value of the GPS receiver at the end of year four when straight-line depreciation is used?
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.
A global positioning system (GPS) receiver is purchased for $3,000. The IRS informs your company that the useful (class) life of the system is seven years. The expected market (salvage) value is $200 at the end of year seven. Solve, a. Use the straight-line method to calculate
Trending now
This is a popular solution!
Step by step
Solved in 5 steps with 7 images
