NAME: AREEBA NAEEM

TOPIC: DEPRECIATION METHODS

ID: 18415

Assignment # 02
QUESTION NO: 1
ABC 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).

SOLUTION:
COST OF MICROSCOPE = $10,500
SALVAGE VALUE = $500
USEFUL LIFE = 4 YEARS

FORMULA:
COST – SALVAGE ÷ USEFUL LIFE
$10,500 – $500 ÷ 4 = $2500

YEAR SCANING DEPRECIATION SCANING

MICROSCOPE MICROSCOPE
(BEGINNING OF (ENDING OF YEAR)
YEAR)
1 $10,500 $2500 $8000
2 $8000 $2500 $5500
3 $5500 $2500 $3000
4 $3000 $2500 $500
QUESTION NO: 2
A new machine costs $12,000 and has a $1,200 salvage value after using it for eight years.
Prepare a year-by-year depreciation for three years’ schedule by the reducing balance method at
20% depreciation rate.

SOLUTION:
COST OF MACHINE = $12,000
SALVAGE VALUE = 1200
RATE = 20%
DEPRECIATION = 10,800

YEAR DEPRECIATION DEPRECIATION VALUE AT THE END

OF THE YEAR
1 20%*(12000 – 1200) $2160 $8640
2 20%*(8640) $1728 $6912
3 20%*(6912) $1382.4 $5529.6

QUESTION NO: 3
A pump cost $1,000 and has a salvage value of $100 after a life of five years. Using the
declining balance depreciation method, determine the 10% depreciation rate.

SOLUTION:

YEAR DEPRECIATION DEPRECIATION VALUE AT THE END

OF THE YEAR
1 10%*($1000 – $100) $90 $810
2 10%*($810) $81 $729
3 10%*($729) $72.9 $656.1
4 10%*($656.1) $65.61 $590.49
5 10%*($590.49) $59.049 $531.441