Problem Set 3

# Problem Set 3 - AAE 320 Farming Systems Management Problem...

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1 AAE 320 Farming Systems Management Problem Set #3 Due Wed. April 9, 2007 1) You had a machine shed built and bought a new combine. The machine shed costs \$75,000 and the combine costs \$180,000. For your internal accounting purposes, you will depreciate the machine shed over 15 years and the combine over 10 years. The machine shed will have zero salvage value, but the combine will have a salvage value of \$80,000. For this problem, you will make 6 tables that report the annual amount of depreciation during each year and the value of the asset at the end of each year. There will be 3 tables for the machine shed and 3 for the combine. The 3 tables for each asset will each use a different depreciation method. The first table will use Straight Line depreciation, the second will use Sum of the Year’s Digits, and the third will use 150% Declining Balance. You will do the full life cycle for each asset (i.e., 15 years for the shed and 10 years for the combine). For the 150% Declining Balance, do not let the asset value fall below the salvage value (set depreciation to zero if needed) and if the implied value does not reach the salvage value by the end of the useful life, take the remaining value in the last year as depreciation. Note: I found it easiest to use a spreadsheet program to do the calculations. Be sure to label each table so I can know what the asset is and the depreciation method.

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