A video recording system was purchased 3 years ago at a cost of $40,000. A 5-year recovery period and DDB depreciation have been used to write off the basis. The system is to be replaced this year with a trade-in value of $4000. What is the difference between the book value and the trade-in value?
What will be an ideal response?
d = 2/5 = 0.40
BV3 = 40,000(1 – 0.40)³
= $8640
Difference = 8640 – 4000 = $4640
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