Additions andor installation also called unadjusted

Info icon This preview shows pages 5–10. Sign up to view the full content.

View Full Document Right Arrow Icon
additions, and/or installation) – also called unadjusted basis depreciation allowance : the depreciation charge or deduction for a given year book value : cost basis less capital recovered, such as depreciation allowances – also called unrecovered investment , adjusted cost basis , and adjusted basis
Image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Principles of Engineering Economic Analysis , 5th edition Depreciation Terminology (cont’d) recovery period : time over which the cost basis can be recovered, keyed to 3, 5, 7, 10, 15, 20, 27.5, or 31.5 years, depending on type of property involved. salvage value : estimated market value at the end of the asset’s useful life useful life : estimate of duration of use of the asset by the taxpayer
Image of page 6
Principles of Engineering Economic Analysis , 5th edition Straight-Line (SLN) Depreciation Let P = cost basis F = salvage value n = recovery period d t = depreciation allowance for year t B t = book value at the end of year t d t = ( P – F )/ n =SLN( P,F,n ) B t = P - td t
Image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Principles of Engineering Economic Analysis , 5th edition Example 9.2 A surface mount placement machine is being purchased for $500,000; it has an estimated useful life of 10 years and a salvage value of $50,000 at that time. Determine the depreciation allowance for the 5 th year and the book value at the end of the 5 th year using SLN. P = $500,000; F = $50,000; n = 10; t = 5 d 5 = ($500,000 - $50,000)/10 = $45,000 =SLN(500000,50000,10) = $45,000 B 5 = $500,000 – 5($45,000) = $275,000
Image of page 8
Principles of Engineering Economic Analysis , 5th edition A car owner desires to sell his SUV when its value reaches approximately half its purchased value.
Image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 10
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern