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    0 EE IM Tutorial V

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    Sivanesh Kumar
    This document contains examples of calculating depreciation using different methods. It provides the depreciation amounts, book values, and salvage values for various assets over multiple years using straight-line, double-declining balance, and general depreciation system methods. The assets described include air handling equipment, computers, buildings, furniture, trucks, scanning machines, and mixing tanks. Formulas and depreciation schedules are given for determining depreciation deductions, accumulated depreciation, and book values under the different methods.

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    0 EE IM Tutorial V

    Uploaded by

    Sivanesh Kumar
    266 views2 pages
    This document contains examples of calculating depreciation using different methods. It provides the depreciation amounts, book values, and salvage values for various assets over multiple years using straight-line, double-declining balance, and general depreciation system methods. The assets described include air handling equipment, computers, buildings, furniture, trucks, scanning machines, and mixing tanks. Formulas and depreciation schedules are given for determining depreciation deductions, accumulated depreciation, and book values under the different methods.

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    97049_0 EE IM Tutorial V

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    This document contains examples of calculating depreciation using different methods. It provides the depreciation amounts, book values, and salvage values for various assets over multiple years using straight-line, double-declining balance, and general depreciation system methods. The assets described include air handling equipment, computers, buildings, furniture, trucks, scanning machines, and mixing tanks. Formulas and depreciation schedules are given for determining depreciation deductions, accumulated depreciation, and book values under the different methods.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    266 views2 pages

    0 EE IM Tutorial V

    Uploaded by

    Sivanesh Kumar
    This document contains examples of calculating depreciation using different methods. It provides the depreciation amounts, book values, and salvage values for various assets over multiple years using straight-line, double-declining balance, and general depreciation system methods. The assets described include air handling equipment, computers, buildings, furniture, trucks, scanning machines, and mixing tanks. Formulas and depreciation schedules are given for determining depreciation deductions, accumulated depreciation, and book values under the different methods.

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    Tutorial V

    Depreciation

    1. Air handling equipment that costs $12,000 has a life of 8 years with a $2000 salvage
    value.
    a. Calculate the straight depreciation amount for each year
    b. Determine the book value after 3 years
    c. What is the rate of depreciation?
    [a: dk=1250, b: BV3=$8,250, c: 0.125]
    2. A special-purpose computer workstation has B=$50,000 with a 4-year recovery
    period. Tabulate and plot the values for SL depreciation, accumulated depreciation
    and book value for each year if
    a. There is no salvage value
    b. SV = $16,000
    [a: dk=$12,500, b: dk=$8,500]
    3. A structure costs $600,000 to construct. It has a 30-year life with an estimated resale
    value of 75% of the construction cost. However, the building will be depreciated to
    zero over a recovery period of 30 years. Calculate the depreciation charge for years 4,
    10 and 25, using
    a. Straight line depreciation
    b. DDB depreciation
    c. What is the implied salvage for DDB?
    [a: $20,000, b: $32.523, $21,498, $7,637, c: $75,720]
    4. The Big-Deal Company has purchased new furniture for their offices at a retail
    price of $100,000. An additional $20,000 has been charged for insurance, shipping
    and handling. The company expects to use the furniture for 10 years (useful life = 10
    years) and then sell it at a salvage (market) value of $10,000.
    By applying the 200% DB method for depreciation:
    a. What is the depreciation during the second year?
    b. What is the book value of the asset at the end of the first year?
    c. What is the book value of the asset after 10 years
    [P7.9: a:$19,200, b:$96,000, c:$12,855]
    If applying the GDS depreciation:
    d. What is the recovery period (property class) of the asset?
    e. What is the depreciation of the asset for the first year?
    f. What is the book value of the asset at the end of the third year?
    g. If the asset were to be sold at the end of the fourth year, what would be the
    depreciation during the fourth year?
    [d:7 years (asset class 00.11), e:$17,148, f:$52,476, g:$7,494]

    2
    5. Your company has purchased a large new truck-tractor for over the road use (asset
    class00.26). It has a basic cost of $180,000. With additional options costing $15,000,
    the cost basis for depreciation purpose is $195,000. Its market value at the end of five
    year is estimated as $40,000. Assume it will be depreciate under GDS:
    a. What is the cumulative depreciation through the end of year three?
    b. What is the MACRS depreciation in fourth year?
    c. The book value at the end of the year two.
    [P7.7: a: $180,550.50, b: $14,449.50; c: $43,329]
    6. An optical scanning machine was purchase for $150,000 in the current tax year (year
    one). It is to be use for reproducing blueprints of engineering drawings, and its
    MACRS class life if nine year. The estimated MV of this machine at the end of 10
    years is $30,000.
    a. What is the GDS recovery period of the machine?
    b. What is the depreciation deduction in year four?
    c. What is the BV at the beginning of year five?
    [a: 5 years; b: $17,280; c: $25,920]
    7. A piece of construction equipment (asset class 15.0) was purchase by the Jones
    Construction Company. The cost basis was $300,000. Determine the GDS and ADS
    depreciation deduction for this property.
    [P7.13]
    8. During its current tax year (year one), a pharmaceutical company purchased a mixing
    tank that had a fair market price of $120,000. It replaced an older, smaller mixing
    tank that had a BV of $15,000. Because a special promotion was underway, the old
    tank was used as a trade-in for the new one, and the cash price was set at $99,500.
    The MACRS class life for the new mixing tank is 9.5 years.
    a. Under the GDS, what is the depreciation deduction in year three?
    b. Under the GDS, what is the BV at the end of year four?
    c. If 200% DB depreciation had been applied to this problem, what would be the
    cumulative depreciation through year four?
    [P7.14: a: $21,984; b: $19,786; c: $70,015]

    Sim Hock Kheng

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