# 2016 25000 25000 total 129000 cost salvage exercise 8

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Chapter 14 / Exercise C2
Introductory Econometrics: A Modern Approach
Wooldridge
Expert Verified
201625,000025,000Total\$129,000CostSalvageExercise 8-­‐5
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Chapter 14 / Exercise C2
Introductory Econometrics: A Modern Approach
Wooldridge
Expert Verified
5-12 Apex Fitness Club uses straight-line depreciation for a machine costing \$30,000, with an estimated four year life and a \$2,000 salvage value. At the beginning of the third year, Apex determines that the machine has three more years of remaining life, after which it will have an estimated \$1,300 salvage value.Compute (1) the machine’s book value at the end of its second year and (2) the amount of depreciation for each of the final three years given the revised estimates.Exercise 8-­‐11 Algorithm
5-13 \$28,0004\$14,7003YearBeginning Book ValueAnnual DepreciationYear-End Book Value1\$30,000\$7,000\$23,000223,0007,00016,000316,0004,90011,100411,1004,9006,20056,2004,9001,300Total\$14,700Estimated Remaining Years3 remaining yearsDepreciation expense = \$4,900 per yearEstimated Useful Life (years)4 yearsDepreciation expense = \$7,000 per yearStraight-Line Depreciation - RevisedBook Value minus Revised Salvage\$16,000 - \$1,300Apex Fitness Club uses straight-line depreciation for a machine costing \$30,000, with an estimated four year life and a \$2,000 salvage value. At the beginning of the third year, Club determines that the machine has three more years of remaining life, after which it will have an estimated \$1,300 salvage value.Straight-Line Depreciation - OriginalCost minus Salvage\$30,000 - \$2,000Exercise 8-­‐11 Algorithm