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HW Economic 1
HW Economic 1
Some seed cleaning equipment was purchased in 2009 for $8,500 and is depreciated by the
double declining balance (DDB) method for an expected life of 12 years. What is the book
value of the equipment at the end of 2014? Original salvage value was estimated to be $2,500
at the end of 12 years.
solation
In this case:
solation
BV1=P-t.Dt =10500-1*2500=8000$
1
Note:- In this method the book value is decreased by the same amount every year and the
yearly depreciation is constant throughout the life of the equipment( see the table_1 ).
n−t +1 4−1+1
D1= S * (P-SV) = 10 * (10500-500) = 4000$
Note : In this method, the yearly deprecation is the highest initially, and then decrease with
the time .Normally, the book value of the equipment will decrease very fast to less than
1/3 the initial value during the first half-life of the equipment, and then the decrease
becomes much slower in later period ( see the table_1 ).
2
BV1=P. (1-d) t =10500*(1- 05.)1 =5250$
Note : The book value is decreeing exponentially with time( see the table_1 ).
A piece of machinery costs $5,000 and has an anticipated $1,000 resale value at the end of its
five year useful life. Compute the depreciation schedule for the machinery by the sum-of-
years-digits method.
solation
3
P=5000$ SV=1000$ n=5Years
“ t=1 years ”
n−t +1 5−1+1
D1= S * (P-SV) = 15 * (5000-1000) = 1333.33$
“ t=2 years ”
n−t +1 5−2+1
D2= S * (P-SV) = 15 * (5000-1000) = 1066.667$
“ t=3 years ”
n−t +1 5−3+1
D3= S * (P-SV) = 15 * (5000-1000) = 800$
“ t=4 years ”
n−t +1 5−4+1
D4= S * (P-SV) = 15 * (5000-1000) = 533.333$
“ t=5 years ”
n−t +1 5−5+1
D5= S * (P-SV) = 15 * (5000-1000) = 266.667$
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