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Homework 28 Solution

# Homework 28 Solution - Homework 28 Solution 12.1a The book...

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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 n 10 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% n 5 So each year, the depreciation amount is 40% of the current book value. At the end of Year 2, the book value will be 2 2 2 BV B 1 d \$500,000 0.6 \$180,000 so the depreciation amount for Year 3 will be 3 2 D d BV 0.4 \$180,000 \$72,000 Under 150% declining balance depreciation, the depreciation rate is 100%

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