HW8.Solution

# 1 2013 problem 4 an asset for drilling was purchased

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Unformatted text preview: asset for drilling was purchased and placed in service by a petroleum production company. Its cost basis is \$60,000, and it has an estimated MV of \$12,000 at the end of an estimated useful life of 14 years. Compute the depreciation amount in the third year and the BV at the end of the fifth year of life by each of these methods: a. SL method. Solution: The SL method ( ) ( ) ( ) ( ) b. The 200% DB method with switchover to SL. Solution: The 200% DB method with switchover to SL. B = \$60,000 () ( ( ) : Annual depreciation deduction in year k (1 ≤ k ≤ N) ) ( ( ) ) : Cumulative depreciation through year k : Book value at end of year k Year, k dk(200%DB) dk(SL) 0 0 0 1 8,571.42 3,428.571 2 7,346.93 3,032.967 3 6,297.37 2,673.469 4 5,397.75 2,344.023 5 4,626.64 2,038.651 So no switchover to SL in 5 years. 4|Page BVk 60000 51,428.57 44,081.63 37,784.26 32,386.51 27,759.86 NAME (Printed): _________________,________________ (Last) (First) IE 343 –HW #8 Due: Nov. 1, 2013 Problem 5 A manufac...
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## This note was uploaded on 11/05/2013 for the course IE 343 taught by Professor Vincent,g during the Fall '08 term at Purdue.

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