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New equipment to read 96-bit product codes thatare
Chapter 16, Problem 16.24(choose chapter or problem)
New equipment to read 96-bit product codes thatare replacing old bar codes has just been purchasedby General Food Stores. As a trial, 1000 of theitems will be initially purchased. For book depreciation purposes (not tax), the total investmentof $50,000 will be written off over a 4-yearperiod, with no salvage value, by applying one ofthree methodsSL, 1.75% DB, or DDB. The objectiveis to have the largest amount of accumulateddepreciation after 2 years, in order to minimizethe lost depreciation if it is again necessary topurchase new-technology readers prior to the end ofthe 4-year useful life of the readers just purchased.You know that the answer is the DDB method, butyou must graphically demonstrate this result to yoursupervisor. Use a spreadsheet to do so.
Questions & Answers
QUESTION:
New equipment to read 96-bit product codes thatare replacing old bar codes has just been purchasedby General Food Stores. As a trial, 1000 of theitems will be initially purchased. For book depreciation purposes (not tax), the total investmentof $50,000 will be written off over a 4-yearperiod, with no salvage value, by applying one ofthree methodsSL, 1.75% DB, or DDB. The objectiveis to have the largest amount of accumulateddepreciation after 2 years, in order to minimizethe lost depreciation if it is again necessary topurchase new-technology readers prior to the end ofthe 4-year useful life of the readers just purchased.You know that the answer is the DDB method, butyou must graphically demonstrate this result to yoursupervisor. Use a spreadsheet to do so.
ANSWER:Step 1 of 3
Depreciation is a regular wear and tear in the value of the asset. Depreciation can be computed by using various methods such as straight line method (SLM), declining balance method (DB), and declining balance method (DDB).