Casio Systems is purchasing a new bar code scanning device for its service center in
San Francisco. The table that follows lists the relevant cost items for this purchase. The operating expenses for the new system are $10,000 per year, and the useful life of the system is expected to be five years. The salvage value for depreciation purpose is equal to 25% of the hardware cost.
i. What is the book value of the device at the end of year three if the SL depreciation method is used?
ii. Suppose that after depreciating the device for two years with the SL method, the firm decides to switch to the double declining balance depreciation method for the remainder of the device’s life (the remaining three years). What is the device’s BV at the end of four years?
San Francisco. The table that follows lists the relevant cost items for this purchase. The operating expenses for the new system are $10,000 per year, and the useful life of the system is expected to be five years. The salvage value for depreciation purpose is equal to 25% of the hardware cost.
i. What is the book value of the device at the end of year three if the SL depreciation method is used?
ii. Suppose that after depreciating the device for two years with the SL method, the firm decides to switch to the double declining balance depreciation method for the remainder of the device’s life (the remaining three years). What is the device’s BV at the end of four years?
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