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 $161,000 Training $15,100 Installation $12,100 Shipping Handling $ 3,100 What is the cost basis for this equipment What is the book value (BV) of the equipment at EOY 4 if the straight line (SL) depreciation method is used What is the depreciation expense for Year 4 if the 150 declining balance (DB) depreciation method is used 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 equipments life (the remaining 3 years) What is the depreciation expense for Year 4 AND what is the equipments book value (BV) at EOY 4

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Question: 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

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	$161,000
Training	$15,100
Installation	$12,100
Shipping & Handling	$ 3,100

What is the cost basis for this equipment?
What is the book value (BV) of the equipment at EOY 4 if the straight line (SL) depreciation method is used?
What is the depreciation expense for Year 4 if the 150% declining balance (DB) depreciation method is used?
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 equipments life (the remaining 3 years). What is the depreciation expense for Year 4 AND what is the equipments book value (BV) at EOY 4?

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