On march 1 2016 hopeful company bought an equipment costing...

On March 1, 2016, Hopeful Company bought equipment costing P1,200,000. Hopeful's depreciation policy is to depreciate long-lived assets using the double declining balance method. The equipment has an estimated useful life of 10 years with a minimum salvage value at the end of its useful life. What is the carrying value of the asset as of December 31, 2018? Select the correct response: 614,000; 480,000; 640,000; 768,000.

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Transcript

00:01 We're asked to determine the book value of an asset after its third year of use.

00:07 So the original cost is $1 .2 million and has a 10 -year life, and salvage value is negligible.

00:28 So in double declining balance depreciation, you don't take into account salvage value anyway.

00:35 You just don't depreciate.

00:37 Past it at the end.

00:39 So we wouldn't have calculated it anyway.

00:43 But how you do double declining is you start with the first year.

00:47 So in this case, it's 2016, and you take the initial cost, or the initial book value at the purchase price, and you divide it by the life, so the 10 years, but then you multiply it by two.

01:08 And that gives you depreciation.

01:11 Expense for the first year, which is 24 ,000.

01:15 Oh sorry, 240 ,000.

01:19 So there's a comma there.

01:21 So we'll make this a column.

01:22 This is the depreciation expense.

01:29 And then over here we're going to have book value.

01:44 Okay.

01:46 So if 240 ,000 is the depreciation expense, book value is 960 ,000.

01:53 And i got this number by table.

01:55 Taking the original cost minus the depreciation expense for the year, and that's the book value...