The Tao Inc. purchased an asset for $170,000 with a salvage value of $8,500 have a useful life of four years. Find the depreciation expense for the first year using the 150% declining blance method. a. $63,750 b. $63,500 c. $63,250 or d. $63,000
To find the depreciation expense for the first year using the 150% declining balance method, we need to follow these steps:
Step 1: Calculate the straight-line depreciation rate
The straight-line depreciation rate can be found by dividing 100% by the useful life of the asset. In this case, the useful life is 4 years, so the straight-line depreciation rate is 100% / 4 = 25%.
Step 2: Determine the declining balance rate
The declining balance rate is calculated by multiplying the straight-line depreciation rate by the chosen factor. In this case, the factor is 150%, so the declining balance rate is 25% * 150% = 37.5%.
Step 3: Calculate the depreciation expense for the first year
To find the depreciation expense for the first year, we multiply the declining balance rate by the initial cost of the asset minus the salvage value.
Depreciation expense = (Initial cost - Salvage value) * Declining balance rate
By substituting the given values:
Depreciation expense = ($170,000 - $8,500) * 37.5%
Depreciation expense = $161,500 * 0.375
Depreciation expense = $60,562.50
However, none of the given options match the calculated answer. Please double-check the answer choices or the calculation above.