Montgomery Scott just purchased a new fusion reactor to power the impulse drive of the Enterprise on Stardate 41153.7 (May 2, 2154). The new reactor will cost $700,000 (all monetary amounts expressed as US dollars). It will cost another $100,000 to install and prepare the reactor for use. He expects to use the new reactor for the next 8 years – until the newest technology, currently under development, becomes available. At the end of the eighth year the fusion drive will have a salvage value of $200,000.
(a) If the Federation uses a straight line depreciation method, what will the book value of the fusion drive be at the end of year 2158 (Year 4)?
(b) If the Federation decides to use a double declining method of depreciation instead, determine their entire depreciation schedule (i.e. the amount of depreciation allowed each year), including any necessary adjustments for over- or under-depreciating the asset.
DO NOT USE EXCEL AND SHOW FULL WORKING STEPS, INCLUDING ALL FORMULAS USED