Question

The manager of a Glidden Paint manufacturing plant is planning to use SL, DDB or MACRS to compare the total depreciation of the first 3 years for a recently purchased mixer that has a first cost of 300,000 QAR, a 5-year recovery period, and a 60,000 QAR salvage value. Find total depreciation of the first three years and the book value at year 3 using SL, DDB and MACRS.

Answer 1

Computation of Depreciation
	Cost of Acqusition			300000
	Salvage			60000
	Deprceiable Value			240000
1		SLM Method
	Year	Opening Value	Depreciation	Net book Value end of Year
	1	300000	48000	252000
	2	252000	48000	204000
	3	204000	48000	156000
	4	156000	48000	108000
	5	108000	48000	60000
	SLM depreciation each Year		240000/5 years	48000
	Total Depreciaiton for first 3 years		48000*3	144000
	Book Value end of 3rd year			156000
2		DDB Method
	Year	Opening Value	DDB Deprecation	Net book Value end of Year
	1	300000	120000	180000
	2	180000	72000	108000
	3	108000	43200	64800
	4	64800	25920	38880
	5	38880	38880	0
	Total Depreciaiton for first 3 years			235200
	Book Value end of 3rd year			64800