Calculation of Depreciation:
The given scenario involves the purchase of a machine in 2003 and the subsequent purchase of a new machine in 2005. The depreciation of the machine is calculated using the diminishing balance method at a rate of 10%.

Step 1: Calculation of Initial Cost:
The initial cost of the machine is the purchase price plus any additional costs incurred for installation or repairs.
Initial cost = Purchase price + Installation cost + Repair cost
Initial cost = $350,000 + $10,000 + $25,000
Initial cost = $385,000

Step 2: Calculation of Depreciation Rate:
The depreciation rate for the diminishing balance method is calculated by dividing the rate of depreciation by the useful life of the asset. In this case, the depreciation rate is 10% and the useful life of the machine is not given. Therefore, we assume a useful life of 10 years.
Depreciation rate = 10% / 10 years
Depreciation rate = 1% per year

Step 3: Calculation of Annual Depreciation:
The annual depreciation is calculated by multiplying the depreciation rate by the net book value of the asset. The net book value is the initial cost minus any accumulated depreciation.
Annual depreciation = Depreciation rate * Net book value

Step 4: Calculation of Accumulated Depreciation:
The accumulated depreciation is the sum of the annual depreciation for each year of the asset's useful life. To calculate the accumulated depreciation, we need to know the number of years since the purchase of the machine.
Accumulated depreciation = Annual depreciation * Number of years

Step 5: Calculation of Net Book Value:
The net book value is the initial cost minus the accumulated depreciation. It represents the value of the asset after accounting for depreciation.
Net book value = Initial cost - Accumulated depreciation

Step 6: Calculation of Depreciation Expense:
The depreciation expense is the annual depreciation that is recorded in the company's financial statements. It is calculated by subtracting the accumulated depreciation from the previous year's net book value.
Depreciation expense = Net book value (previous year) - Accumulated depreciation (previous year)

Step 7: Calculation of Net Book Value After Disposal:
After disposing of the damaged machine, the net book value is adjusted to reflect the disposal. The net book value after disposal is calculated by subtracting the disposal cost from the net book value before disposal.
Net book value after disposal = Net book value before disposal - Disposal cost

Step 8: Calculation of Depreciation of New Machine:
The depreciation of the new machine is calculated using the same method as the old machine. The net book value of the new machine is adjusted to reflect the additional purchase cost.
Depreciation expense (new machine) = Net book value (previous year) - Accumulated depreciation (previous year)

Summary:
In summary, the depreciation of the machine is calculated using the diminishing balance method at a rate of 10%. The initial cost is calculated by summing the purchase price, installation cost, and repair cost. The annual depreciation is calculated by multiplying the depreciation rate by the net book value. The accumulated depreciation is the sum of the annual depreciation for each year. The net