Question

A new machine purchased by a firm has an initial cost of $30,000, annual operating cost...

A new machine purchased by a firm has an initial cost of $30,000, annual operating cost of $1,000 per year, and a salvage value of $5,000 after a 9 years recovery period. The firm uses MARR of 15% per year. Determine a) the depreciation charge at year 4, and b) the book value at year 4 using the Straight Line (SL) method.From the information in Q6, calculate a) the depreciation charge at year 4, and b) the book value at year 4 using the Double Declining Balance (DDB) method. Plot the two lines from both SL and DDB from Q6 and Q7 (you may use excel). The x-axis is the number of years up to the recovery period, while the y-axis is the book value (BV). Note that the book value for DDB cannot drop below the salvage value.

Only do the plotting, i know the rest.

Homework Answers

Answer #1

Initial Cost=C=$30000

Salvage=S=$5000

In case of SL depreciation method

Depreciation per year=DVn=(30000-5000)/9=2777.78

Depreciation rate in case of DDB=200%/9

Book Value
Year, n    SL DDB
BVn=BV(n-1)-Dn BV=BVo*(1-200%/9)^n
0 30000.00 30000.00
1 27222.22 23333.33
2 24444.44 18148.15
3 21666.67 14115.23
4 18888.89 10978.51
5 16111.11 8538.84
6 13333.33 6641.32
7 10555.56 5165.47
8 7777.78 5000.00
9 5000.00 5000.00

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Q6) A new machine purchased by a firm has an initial cost of $30,000, annual operating...
Q6) A new machine purchased by a firm has an initial cost of $30,000, annual operating cost of $1,000 per year, and a salvage value of $5,000 after a 9 years recovery period. The firm uses MARR of 15% per year. Determine a) the depreciation charge at year 4, and b) the book value at year 4 using the Straight Line (SL) method. Q7) From the information in Q6, calculate a) the depreciation charge at year 4, and b) the...
An asset will cost $1,750 when purchased this year. It is further expected to have a...
An asset will cost $1,750 when purchased this year. It is further expected to have a salvage value of $250 at the end of its five year depreciable life. Calculate complete depreciation schedules giving the depreciation charge, D(n), and end-of-year book value, B(n), for straight-line (SL), Declining Balance (DB) with a rate of d=0.25, double declining balance (DDB), and modified accelerated cost recovery (MACRS) depreciation methods. Assume a MACRS recovery period of 5 years with the following depreciation rates. Year...
Using the Double Declining Balance (DDB) depreciation method for equipment with an initial cost of $282,000,...
Using the Double Declining Balance (DDB) depreciation method for equipment with an initial cost of $282,000, an anticipated useful life of 10 years, and a salvage value of $35,250, calculate the (a) depreciation rate, d=?, (b) the Depreciation charge, D=?, at the end of year 2, and (c) the Book Value, BV=?, at the end of year 2.
The manager of a Glidden Paint manufacturing plant is planning to use SL, DDB or MACRS...
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.
video-recording system was purchased 4 years ago at a cost of $41,000. A 5-year recovery period...
video-recording system was purchased 4 years ago at a cost of $41,000. A 5-year recovery period and DDB (Double Declining Balance) depreciation have been used to write off the basis. The system is to be replaced this year with a trade-in value of $7,000. What is the difference between the book value and the trade-in value? The difference between the book value and the trade-in value is $__________
A video-recording system was purchased 2 years ago at a cost of $36,000. A 5-year recovery...
A video-recording system was purchased 2 years ago at a cost of $36,000. A 5-year recovery period and DDB (Double Declining Balance) depreciation have been used to write off the basis. The system is to be replaced this year with a trade-in value of $5,000. What is the difference between the book value and the trade-in value? The difference between the book value and the trade-in value is ______$ .
A video-recording system was purchased 3 years ago at a cost of $38,000. A 5-year recovery...
A video-recording system was purchased 3 years ago at a cost of $38,000. A 5-year recovery period and DDB (Double Declining Balance) depreciation have been used to write off the basis. The system is to be replaced this year with a trade-in value of $5,500. What is the difference between the book value and the trade-in value? The difference between the book value and the trade-in value is $ .
A digitally controlled plane for manufacturing furniture is purchased on April 1 by La-Z-boy for $66,000....
A digitally controlled plane for manufacturing furniture is purchased on April 1 by La-Z-boy for $66,000. It is expected to last 12 years and have a salvage value of $5,000. Using the information above answer questions A-C below: A. Using the Declining Balance method (DB), what is the depreciation write-off for year 4 (d4)? A.    $10,300 B.     $ 8,300 C.    $ 6,700 D.    $ 5,400 B. Using the Double Declining Balance method (DDB), what is the book value for year...
Problems 7-12 use the following information:  A firm purchased a new piece of equipment with an estimated...
Problems 7-12 use the following information:  A firm purchased a new piece of equipment with an estimated useful life of five years.  The cost of the equipment was $55,000. The salvage value is estimated to by $5,000 at the end of year 5. Using the Double-Declining Balance method of depreciation, what is the book value for year 4? A. 2,128 B. 5,000 C. 2,851 D. 7,920 E. 7,128
"A firm is trying to decide whether to keep an item of construction equipment for another...
"A firm is trying to decide whether to keep an item of construction equipment for another year. The firm has been using double-declining-balance (DDB) for book purposes, and this is the 3rd year of ownership of the equipment, which cost $185,000 new. The useful life of the asset is 11 years and has a salvage value of $11,000. What is the book value of the equipment at the end of year 2?"
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT