Business Equipment Is Often Depreciated Using the Double Declining-Balance Method $n = \frac { \log V - \log C } { \log \left( 1 - \frac { 2 } { N } \right) }$

question 8

Multiple Choice

Business equipment is often depreciated using the double declining-balance method. In this method, a piece of equipment with a life expectancy of N years, costing C dollars, will depreciate to a value of V dollars in n years, where n is given by the formula: $n = \frac { \log V - \log C } { \log \left( 1 - \frac { 2 } { N } \right) }$ A computer that cost $10,000 has a life expectancy of 5 years. If it has depreciated to a value of $2,000, how old is it? Round the answer to the nearest tenth of the year.

• A)3.2 years old
• B)2.2 years old
• C)1.9 years old
• D)2.5 years old
• E)2.8 years old

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Definitions:

Translation Adjustment

An accounting entry that reflects the impact of currency fluctuations in the financial statements of a company with operations in foreign currencies.

Foreign Currency

Currency used that is not the domestic currency of the country in which a transaction is being conducted.

Net Asset Balance Sheet Exposure

The risk that the value of a company's assets minus its liabilities, measured in its reporting currency, will decrease due to foreign exchange rate fluctuations.

Translation Adjustment

An adjustment made in the financial statements to account for exchange rate variations in translating operations of foreign subsidiaries into the parent company’s reporting currency.