A plumber leases equipment which is valued at $60 000 - HSC - SSCE Mathematics Standard - Question 28 - 2023 - Paper 1

To find the salvage value using the declining-balance method, we use the formula:

$S = V_0 \times (1 - r)^n$

where:

• $V_0 = 60,000$ (initial value)
• $r = 0.12$ (rate of depreciation)
• $n = 3$ (number of years)

Now we can perform the calculation:

$S = 60,000 \times (1 - 0.12)^3$ $= 60,000 \times (0.88)^3$ $= 60,000 \times 0.681472 = 40,888.32$

Thus, the salvage value at the end of 3 years using the declining-balance method is approximately $40,888.32.

Comparing the two methods:

• Straight-line method: $49,500
• Declining-balance method: $40,888.32

The declining-balance method provides a lower salvage value after 3 years.