ENGINEERING ECONOMIC ENHANCED EBOOK
ENGINEERING ECONOMIC ENHANCED EBOOK
14th Edition
ISBN: 9780190931940
Author: NEWNAN
Publisher: OXF
Question
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Chapter 11, Problem 43P
To determine

i.

MACRS depreciation.

Expert Solution
Check Mark

Answer to Problem 43P

MACRS depreciation is $ 84800.

Explanation of Solution

Given:

Cost of machine = $200000

Useful Life = 10 years.

Calculation:

A 10-year property class with half-yearly convention has been assumed.

MACRS
Year Depreciation Base ($) Depreciation Rate (%) Annual Depreciation ($) Year-end Book Value ($)
1 2,00,000 10 20,000 1,80,000
2 2,00,000 18 36,000 1,44,000
3 2,00,000 14.4 28,800 1,15,200
TOTAL 84,800

Conclusion:

MACRS depreciation is $ 84800.

To determine

ii.

Straight Line Depreciation.

Expert Solution
Check Mark

Answer to Problem 43P

Straight Line Depreciation is $20000 per annum.

Explanation of Solution

Given:

Cost of machine = $200000

Useful Life = 10 years.

Calculation:

SLM depreciation =

Cost / Useful life=$20000010 = $20,000 per year

Year Beginning-of-year Book Value ($) Annual Depreciation ($) Year-end Book Value ($)
1 2,00,000 20,000 1,80,000
2 1,80,000 20,000 1,60,000
3 1,60,000 20,000 1,40,000
TOTAL 60,000

Conclusion:

Straight Line Depreciation is $20000 per annum

iii.

Sum-of-years-digit depreciation.

Sum-of-years-digit depreciation is $98182.

Given:

Cost of machine = $200000

Useful Life = 10 years.

Calculation:

Sum-of-years-digit depreciation (SOYD)

=1+2+3+4+5+6+7+8+9+10=55

Depreciation base = $200,000

Annual depreciation in year N = Depreciation base×(Number of years remaining at beginning of year N)SOYD

SOYD
Year Depreciation Base ($) Depreciation Rate Annual Depreciation ($) Year-end Book Value ($)
1 2,00,000 10/55 36,364 1,63,636
2 2,00,000 9/55 32,727 1,30,909
3 2,00,000 8/55 29,091 1,01,818
TOTAL 98,182

Conclusion:

Sum-of-years-digit depreciation is $98182.

iv.

Double declining balance depreciation.

Double declining balance depreciation is $ 97600.

Given:

Cost of machine = $200000

Useful Life = 10 years.

Calculation:

SLM Depreciation rate =

1UsefulLife =110 = 0.1

DDB Rate =

0.1×2=0.2

DDB
Year Depreciation Base ($) Depreciation Rate Annual Depreciation ($) Year-end Book Value ($)
1 2,00,000 0.2 40,000 1,60,000
2 1,60,000 0.2 32,000 1,28,000
3 1,28,000 0.2 25,600 1,02,400
TOTAL 97,600

Conclusion:

Double declining balance depreciation is $ 97600

(e).

v.

150% Declining balance depreciation.

150% Declining balance depreciation is $77175.

Given:

Cost of machine = $200000

Useful Life = 10 years.

Calculation:

150% Declining balance depreciation rate = 0.1 x 1.5 = 0.15

150% DECLINING BALANCE METHOD
Year Depreciation Base ($) Depreciation Rate Annual Depreciation ($) Year-end Book Value ($)
1 2,00,000 0.15 30,000 1,70,000
2 1,70,000 0.15 25,500 1,44,500
3 1,44,500 0.15 21,675 1,22,825
TOTAL 77,175

Conclusion:

150% Declining balance depreciation is $77175.

To determine

iii.

Sum-of-years-digit depreciation.

Expert Solution
Check Mark

Answer to Problem 43P

Sum-of-years-digit depreciation is $98182.

Explanation of Solution

Given:

Cost of machine = $200000

Useful Life = 10 years.

Calculation:

Sum-of-years-digit depreciation (SOYD)

=1+2+3+4+5+6+7+8+9+10=55

Depreciation base = $200,000

Annual depreciation in year N = Depreciation base×(Number of years remaining at beginning of year N)SOYD

SOYD
Year Depreciation Base ($) Depreciation Rate Annual Depreciation ($) Year-end Book Value ($)
1 2,00,000 10/55 36,364 1,63,636
2 2,00,000 9/55 32,727 1,30,909
3 2,00,000 8/55 29,091 1,01,818
TOTAL 98,182

Conclusion:

Sum-of-years-digit depreciation is $98182.

iv.

Double declining balance depreciation.

Double declining balance depreciation is $ 97600.

Given:

Cost of machine = $200000

Useful Life = 10 years.

Calculation:

SLM Depreciation rate =

1UsefulLife =110 = 0.1

DDB Rate =

0.1×2=0.2

DDB
Year Depreciation Base ($) Depreciation Rate Annual Depreciation ($) Year-end Book Value ($)
1 2,00,000 0.2 40,000 1,60,000
2 1,60,000 0.2 32,000 1,28,000
3 1,28,000 0.2 25,600 1,02,400
TOTAL 97,600

Conclusion:

Double declining balance depreciation is $ 97600

(e).

v.

150% Declining balance depreciation.

150% Declining balance depreciation is $77175.

Given:

Cost of machine = $200000

Useful Life = 10 years.

Calculation:

150% Declining balance depreciation rate = 0.1 x 1.5 = 0.15

150% DECLINING BALANCE METHOD
Year Depreciation Base ($) Depreciation Rate Annual Depreciation ($) Year-end Book Value ($)
1 2,00,000 0.15 30,000 1,70,000
2 1,70,000 0.15 25,500 1,44,500
3 1,44,500 0.15 21,675 1,22,825
TOTAL 77,175

Conclusion:

150% Declining balance depreciation is $77175.

To determine

iv.

Double declining balance depreciation.

Expert Solution
Check Mark

Answer to Problem 43P

Double declining balance depreciation is $ 97600.

Explanation of Solution

Given:

Cost of machine = $200000

Useful Life = 10 years.

Calculation:

SLM Depreciation rate =

1UsefulLife =110 = 0.1

DDB Rate =

0.1×2=0.2

DDB
Year Depreciation Base ($) Depreciation Rate Annual Depreciation ($) Year-end Book Value ($)
1 2,00,000 0.2 40,000 1,60,000
2 1,60,000 0.2 32,000 1,28,000
3 1,28,000 0.2 25,600 1,02,400
TOTAL 97,600

Conclusion:

Double declining balance depreciation is $ 97600

(e).

To determine

v.

150% Declining balance depreciation.

Expert Solution
Check Mark

Answer to Problem 43P

150% Declining balance depreciation is $77175.

Explanation of Solution

Given:

Cost of machine = $200000

Useful Life = 10 years.

Calculation:

150% Declining balance depreciation rate = 0.1 x 1.5 = 0.15

150% DECLINING BALANCE METHOD
Year Depreciation Base ($) Depreciation Rate Annual Depreciation ($) Year-end Book Value ($)
1 2,00,000 0.15 30,000 1,70,000
2 1,70,000 0.15 25,500 1,44,500
3 1,44,500 0.15 21,675 1,22,825
TOTAL 77,175

Conclusion:

150% Declining balance depreciation is $77175.

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