Homework 28 Solution
12.1a The book value can be calculated by subtracting all of the depreciation charges from the installed cost:
BV
3
= $100,000 – $40,000 – $24,000 – $14,000 = $22,000
12.5
The installed cost of the equipment is $475,000 + $75,000 = $550,000 and the salvage value is 15% of
that, or $82,500. Using SL depreciation, the annual depreciation amount is:
B S
$550,000 $82,500
D
$46,750
n1
0
The book value after 5 years can be calculated directly from the first cost as
BV
5
= B – 5D = $550,000 – $46,750(5) = $316,250
The book value after 10 years can be calculated the same way:
BV
10
= B – 10D = $550,000 – $46,750(10) = $82, 500
This, of course, is equal to the salvage value of the equipment.
12.9
The depreciation rate under DDB depreciation is
100%
200%
d
2
40%
n5
So each year, the depreciation amount is 40% of the current book value. At the end of Year 2, the book
value will be
22
2
BV
B 1 d
$500,000 0.6
$180,000
so the depreciation amount for Year 3 will be
32
D
d BV
0.4 $180,000
$72,000
Under 150% declining balance depreciation, the depreciation rate is
100%
150%
d
1.5
30%
So each year, the depreciation amount is 30% of the current book value. At the end of Year 2, the book