Question

A company that manufactures personal hygiene items purchases machinery for $220,000 that is considered to last 7 years; it is estimated that at the end of the period it will have a salvage value of $1000. Find: to. The depreciation rate. b. The book value at the end of the sixth year.

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Eliseo

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To find the depreciation rate, we can use the formula:

\text{{Depreciation Rate}} = \frac{{\text{{Cost}} - \text{{Salvage Value}}}}{{\text{{Useful Life}}}}

Given:

Cost = $220,000

Salvage Value = $1,000

Useful Life = 7 years

Substituting the values into the formula, we have:

\text{{Depreciation Rate}} = \frac{{220,000 - 1,000}}{{7}}

Simplifying the expression, we get:

\text{{Depreciation Rate}} = \frac{{219,000}}{{7}}

\text{{Depreciation Rate}} = 31,285.71

So, the depreciation rate is $31,285.71 per year.

To find the book value at the end of the sixth year, we can use the formula:

\text{{Book Value}} = \text{{Cost}} - (\text{{Depreciation Rate}} \times \text{{Number of Years}})

Given:

Cost = $220,000

Depreciation Rate = $31,285.71

Number of Years = 6 years

Substituting the values into the formula, we have:

\text{{Book Value}} = 220,000 - (31,285.71 \times 6)

Simplifying the expression, we get:

\text{{Book Value}} = 220,000 - 187,714.26

\text{{Book Value}} = 32,285.74

Answer:

a. The depreciation rate is $31,285.71 per year.

b. The book value at the end of the sixth year is $32,285.74.

Given:

Cost = $220,000

Salvage Value = $1,000

Useful Life = 7 years

Substituting the values into the formula, we have:

Simplifying the expression, we get:

So, the depreciation rate is $31,285.71 per year.

To find the book value at the end of the sixth year, we can use the formula:

Given:

Cost = $220,000

Depreciation Rate = $31,285.71

Number of Years = 6 years

Substituting the values into the formula, we have:

Simplifying the expression, we get:

Answer:

a. The depreciation rate is $31,285.71 per year.

b. The book value at the end of the sixth year is $32,285.74.

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