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I. ASSET VALUATION AND DEPRECIATION EXERCISES
I
STRAIGHT LINE DEPRECIATION
The first two problems provide a closer look at Straight Line versus Double Declining Balance
Depreciation.
In these problems, assume all machinery is bought at the first of the year.
Machine
Cost
Salvage Value
Useful Life
1) Tractor A
50,000
20,000
5
2) Tractor B
60,000
0
5
3) Combine
84,000
0
7
________________________________________________________________
Assume you own the machinery above.
Calculate annual depreciation using the straightline
method.
Tractor A
Tractor B
Combine
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
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DOUBLE DECLINING BALANCE
Now Calculate annual depreciation on this machinery using double declining balance.
Be
careful not to exceed the salvage value.
If the salvage value is zero, switch to straightline in the
year when straightline yields higher depreciation.
(Use the remaining value as the starting point
when you change.)
Tractor A
Tractor B
Combine
Year 1
Year 2
Year 3
Year 4
Year 5
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 Fall '08
 Duffy,P

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