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Tutorial 8 Problem Statement 1

The document presents three problems related to depreciation calculations using different methods. The first problem involves calculating the sixth-year depreciation cost for an asset using straight-line depreciation after re-estimating its service life and salvage value. The second problem discusses the unit-of-production method for a company's equipment and compares it with the straight-line method for annual depreciation costs, while the third problem analyzes the impact of varying property and state income tax rates on the net income of a chemical plant investment.

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Karan Agarwal
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15 views2 pages

Tutorial 8 Problem Statement 1

The document presents three problems related to depreciation calculations using different methods. The first problem involves calculating the sixth-year depreciation cost for an asset using straight-line depreciation after re-estimating its service life and salvage value. The second problem discusses the unit-of-production method for a company's equipment and compares it with the straight-line method for annual depreciation costs, while the third problem analyzes the impact of varying property and state income tax rates on the net income of a chemical plant investment.

Uploaded by

Karan Agarwal
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Tutorial 8

Problem xx.xx
The original investment for an asset was ₹10000 and asset was assumed
to have service life of 12 years with ₹2000 salvage value at the end of the
service life. After the asset has been used for five years, the remaining
service life and final salvage value was re-estimated as 10 years and
₹1000, respectively. Under these conditions, what is the depreciation cost
during the sixth year of the total life if straight-line depreciation is used?
Problem 7.16
A small company is using the unit-of-production method for determining
depreciation costs. The original value of the property is ₹110,000. It is
estimated that the company can produce 11,000 units before the
equipment will have a salvage or scrap value of zero; that is, the
depreciation cost per unit produced is ₹10. The equipment produces 200
units during the first year, and the production rate is doubled each year for
the first 4 years. The production rate obtained in the fourth year is then
held constant until the value of the equipment is paid off. What would
have been the annual depreciation cost if the straight-line method based
on this same time period had been used?
Tutorial 8
Problem 7.9
The fixed-capital investment for an existing chemical plant is $20
million. Annual property taxes amount to 1 percent of the fixed-capital
investment, and state income taxes are 5 percent of the gross
earnings. The net income after all taxes is $2 million, and the federal
income taxes amount to 35 percent of gross earnings. If the same plant
had been constructed for the same fixed-capital investment but at a
location where property taxes were 4 percent of the fixed capital
investment and state income taxes were 2 percent of the gross
earnings, what would be the net income per year after taxes, assuming
all other cost factors were unchanged?

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