The price of a concrete pump purchased by Dolan Pumping was $42,500. It cost $1,200 for delivery. The salvage value at the end of 7 years is $7,200. Using the 150% declining-balance depreciation method, calculate the book value at the end of year 2. (Round the declining-balance rate to 4 decimal places, and all dollar amounts to the nearest cent)

Question

Quizplus · Accepted Answer

The 150% declining balance depreciation method calculates depreciation at 150% of the straight-line rate. First, calculate the straight-line depreciation rate, which is 1 divided by the useful life (7 years), or about 0.1429. The 150% declining balance rate is 0.1429 * 1.5 = 0.2143. The initial cost is $42,500 plus $1,200 for delivery, totaling $43,700. For the first year, the depreciation is $43,700 * 0.2143 = $9,362.61, leaving a book value of $43,700 - $9,362.61 = $34,337.39. For the second year, the depreciation is $34,337.39 * 0.2143 = $7,360.31, leaving a book value of $34,337.39 - $7,360.31 = $26,977.08.

The Price of a Concrete Pump Purchased by Dolan Pumping