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An asset for a production line was purchased and placed in service by a large manufacturing company. It costs $50000 with a trade in of the old unit which is valued at $15000. The new asset has an estimated salvage value of $2000 at the end of an estimated useful life of 10 years. If the 200% DB with a switchover to SL method is used for the depreciation, a) from which year would the switchover happen? b) what is the depreciation value in year 9?

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Karabo99

Answer and Explanation:

a. The switchover from 200% DB to SL should happen from Year 7.  

b. Depreciation for Year 9 is $3,759.84  

Since, the trade in is for $15,000, the same should be added to the cost of new assets because the new asset has been reduced by the amount of trade-in. Therefore, the value of new asset should be $50,000 + $15,000 = $65,000.

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