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    5 Depreciation Problems

    Uploaded by

    umar
    The document discusses different methods for calculating depreciation schedules for assets. It provides examples of straight-line depreciation and MACRS depreciation calculations over multiple years for equipment purchased for $12,000, $76,000, and $150,000.

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    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd

    5 Depreciation Problems

    Uploaded by

    umar
    140 views2 pages
    The document discusses different methods for calculating depreciation schedules for assets. It provides examples of straight-line depreciation and MACRS depreciation calculations over multiple years for equipment purchased for $12,000, $76,000, and $150,000.

    Original Description:

    depreciation calculation methods

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    The document discusses different methods for calculating depreciation schedules for assets. It provides examples of straight-line depreciation and MACRS depreciation calculations over multiple years for equipment purchased for $12,000, $76,000, and $150,000.

    Copyright:

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

    5 Depreciation Problems

    Uploaded by

    umar
    The document discusses different methods for calculating depreciation schedules for assets. It provides examples of straight-line depreciation and MACRS depreciation calculations over multiple years for equipment purchased for $12,000, $76,000, and $150,000.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    of 2

    Depreciation Problems

    1. Some special handling devices can be obtained for $12,000. At the end of 4
    years, they can be sold for $600. Compute the depreciation schedule for the
    devices using the following methods:
    a. Straight-line depreciation
    Answer:
    Depreciation = (Cost-Salvage Value)/Useful Life
    Depreciation =( $12000-600)/4
    Depreciation = 2850

    2. The RX Drug Company has just purchased an encapsulating machine for $76,000.
    The plant engineer estimates the machine has a useful life of 5 years and little or no
    salvage value. He will use zero salvage value in the computation.
    a. Compute the depreciation schedule for the machine using straight-line depreciation.
    Answer:
    Depreciable cost = Cost Salvage Value
    Depreciable cost = 76000-0 = 76000
    Depreciation rate = 1/Useful life x 100
    Depreciation rate = (1/5 x 100) = 20%
    Depreciation schedule

    Year

    Beginnin
    g
    Balance

    Depreci
    able
    cost

    76000

    76000

    60800

    76000

    45600

    76000

    30400

    76000

    15200

    76000

    Rate
    20.00
    %
    20.00
    %
    20.00
    %
    20.00
    %
    20.00
    %

    Deprecia
    tion
    Expense

    Accumula
    ted
    Deprecia
    tion

    Ending
    Balance

    15200

    15200

    60800

    15200

    30400

    45600

    15200

    45600

    30400

    15200

    60800

    15200

    15200

    76000

    3. Use the MACRS method to calculate the yearly depreciation allowances and book
    values for a firm that has purchased $150,000 worth of office equipment that qualifies as
    depreciable property. This is considered 7-year property.
    The MACRS depreciation percentages for 7-year personal property are given below.
    Recovery Year 7-Year Property
    1
    14.29%
    2
    24.49
    3
    17.49
    4
    12.49
    5
    8.93
    6
    8.92
    7
    8.93
    8
    4.46
    Answer:
    Year
    1
    2
    3
    4
    5
    6
    7
    8

    Deprecia
    tion
    Expense

    Accumula
    ted
    Depreciat
    ion

    Ending
    Balanc
    e

    21,429

    21,429

    128,571

    36,735

    58,163

    91,837

    26,240

    84,402

    65,598

    18,743

    103,145

    46,855

    8.93%

    13,388

    116,532

    33,468

    8.93%

    13,388

    129,919

    20,081

    8.93%

    13,388

    143,306

    6,694

    4.46%

    6,693

    150,000

    Basis

    rate

    150,0
    00
    150,0
    00
    150,0
    00
    150,0
    00
    150,0
    00
    150,0
    00
    150,0
    00
    150,0
    00

    14.29
    %
    24.49
    %
    17.49
    %
    12.50
    %

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