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HW Economic 1

1) The equipment was purchased in 2009 for $8,500 and is being depreciated using the double declining balance (DDB) method over 12 years with an estimated salvage value of $2,500. 2) Using the DDB method, the book value of the equipment at the end of 2014 is $3,409. 3) The document provides examples of calculating depreciation schedules using straight line, sum of years digits, and double declining balance methods.

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154 views5 pages

HW Economic 1

1) The equipment was purchased in 2009 for $8,500 and is being depreciated using the double declining balance (DDB) method over 12 years with an estimated salvage value of $2,500. 2) Using the DDB method, the book value of the equipment at the end of 2014 is $3,409. 3) The document provides examples of calculating depreciation schedules using straight line, sum of years digits, and double declining balance methods.

Uploaded by

nn1129374
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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HOMEWORK 3118239 ‫نضال ناصر سعد الفقي‬

Example problem (5)

Some seed cleaning equipment was purchased in 2009 for $8,500 and is depreciated by the
double declining balance (DDB) method for an expected life of 12 years. What is the book
value of the equipment at the end of 2014? Original salvage value was estimated to be $2,500
at the end of 12 years.

solation

P=8500$ n=12years SV=2500$ t=(2014-2009)=5years

 In this case:

d=2/n= 2/12= 0.167


t-1
D5= d. P. (1-d) =0.167* 8500*(1-0.167) 5-1 = 683.463$
t 5
BV5=P. (1-d) =8500*(1- 0.167) = 3409.133$

Example problem (6)

Your company is considering the purchase of a second-hand scanning microscope at a cost of


$10,500, with an estimated salvage value of $500 and a projected useful life of four years.
Determine the straight-line (SL), sum of years digits (SYD), and double declining balance (DDB)
depreciation schedules.

solation

P=10500$ SV=500$ n=4years

1.Straight Line Method, SLM:

D1= (P-SV)/n= (10500-500)/4=2500$

BV1=P-t.Dt =10500-1*2500=8000$
1
 Note:- In this method the book value is decreased by the same amount every year and the
yearly depreciation is constant throughout the life of the equipment( see the table_1 ).



2.Sum of Years Digits method, SYD:


n
n(n+1) 4 (4 +1)
S=∑
2
=
2
= 10 t=1 years
i=1

n−t +1 4−1+1
D1= S * (P-SV) = 10 * (10500-500) = 4000$

t(n−0.5∗t+ 0.5) 1(4−0.5∗1+0.5)


BV1= P - S *(P - SV) = 105000 - 10 *(10500-500)= 6500$

 Note : In this method, the yearly deprecation is the highest initially, and then decrease with
the time .Normally, the book value of the equipment will decrease very fast to less than
1/3 the initial value during the first half-life of the equipment, and then the decrease
becomes much slower in later period ( see the table_1 ).



3. Double Decline Balance method, DDB:

d=2/n= 2/4= 0.5 t= 1 years

D1= d. P. (1-d) t-1 =0.5*10500 *(1-0.5) 1-1 = 5250$

2
BV1=P. (1-d) t =10500*(1- 05.)1 =5250$

 Note : The book value is decreeing exponentially with time( see the table_1 ).

Example problem (7)

A piece of machinery costs $5,000 and has an anticipated $1,000 resale value at the end of its
five year useful life. Compute the depreciation schedule for the machinery by the sum-of-
years-digits method.

solation

3
P=5000$ SV=1000$ n=5Years

 Sum of Years Digits method, SYD:


n
n(n+1) 5(5+1)
S=∑
2
=
2
= 15
i=1

“ t=1 years ”
n−t +1 5−1+1
D1= S * (P-SV) = 15 * (5000-1000) = 1333.33$


“ t=2 years ”
n−t +1 5−2+1
D2= S * (P-SV) = 15 * (5000-1000) = 1066.667$


“ t=3 years ”
n−t +1 5−3+1
D3= S * (P-SV) = 15 * (5000-1000) = 800$


“ t=4 years ”
n−t +1 5−4+1
D4= S * (P-SV) = 15 * (5000-1000) = 533.333$


“ t=5 years ”
n−t +1 5−5+1
D5= S * (P-SV) = 15 * (5000-1000) = 266.667$

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