D8=3

Question 4 [Total 15 marks ABC Systems Co. Ltd. is purchasing a new equipment for its service center. The table below lists the relevant cost items for this purchase. The operating expenses for the new equipment are $10,000 per year, and the useful life of the equipment is expected to be 5 years. The salvage value (SV) of the equipment at EOY 5 is equal to 25% of the hardware cost. Cost Hardware $160,000 + D8 x1,000 Training $15,000 + D8 x 100 Installation $12,000 + D8 x 100 Shipping & Handling $3,000 + D8 x 100 (a) What is the cost basis for this equipment? (b) What is the book value (BV) of the equipment at EOY 4 if the straight line (SL) depreciation method is used? (c) What is the depreciation expense for Year 4 if the 150% declining balance (DB) depreciation method is used? (d) Suppose that after depreciating the equipment for 2 years with the SL method, the firm decides to switch to the double declining balance (DB) depreciation method for the remainder of the equipment's life (the remaining 3 years). What is the depreciation expense for Year 4 AND what is the equipment's book value (BV) at EOY 4