Deck 14: Depreciation

Question 1

What is the book value at the end of 3 years using the straight-line depreciation method? ____________

Answer 1

Recall the formula, Finding Amount to be Depreciated,
" "
Find the amount to be depreciated, Therefore, the depreciable amount is .
Recall the formula, Finding Annual Depreciation,
" "
Find the annual amount of depreciation, Therefore, the annual amount of depreciation is .
Find the accumulated depreciation at the end of the third year, Therefore, the accumulated depreciation at the end of the third year is .
Recall the formula, Finding Book Value,
" "
Find the book value at the end of the third year, Therefore, under the straight-line depreciation method, the book value at the end of the third year is .

Question 2

FORD MOTOR COMPANYy
www.ford.com
Facts :
• 1925: Price of first Ford truck was $281
• 1950s: Cars styled for more comfort
• 2003: Celebrates 100th anniversary
• 2009-10: Weathers financial crisis without government help
In 1903, with $28,000 in cash, Henry Ford started Ford Motor Company, which is now one of the world's largest companies. Ford's greatest contribution to automobile manufacturing was the moving assembly that allowed individual workers to stay in one place and perform the same task on each vehicle as it passed by. The moving assembly line allowed Ford to cut costs and reduce prices of new automobiles so that average working families could afford them. Today, the Ford Motor Company sells a variety of vehicles under the Ford and Lincoln brands.
Capital Curb and Concrete purchased a new Ford truck for $26,500 to be used by the sales manager, who often drives to construction sites to work with customers. The firm's accountant believes that the useful life of the truck is 5 years and that the estimated salvage value is $4500.
Using the information above find the book value of the pickup truck after 3 years using the straight-line method of depreciation. ____________

Answer 2

Recall the formula, Finding Amount to be Depreciated,
" "
Find the amount to be depreciated, Therefore, the depreciable amount is .
Recall the formula, Finding Annual Depreciation,
" "
Find the annual amount of depreciation, Therefore, the annual amount of depreciation is .
Find the accumulated depreciation at the end of the third year, Therefore, the accumulated depreciation at the end of the third year is .
Recall the formula, Finding Book Value,
" "
Find the book value at the end of the third year, Therefore, under the straight-line depreciation method, the book value at the end of the third year is .

Question 3

To help you review, the numbers in brackets show the section in which the topic was discussed.
Find the annual straight-line and double-declining-balance rates (percents) of depreciation and the sum-of-the-years '-digits fraction for the first year estimated lives.

Answer 3

Find the annual straight-line rate, Therefore, the annual straight-line rate of depreciation for the first year is .
Find the double-declining-balance rate by doubling the annual straight-line rate, Therefore, the double-declining-balance rate for the first year is .
Consider the sum-of-the-years' digits fraction.
First determine the denominator of the depreciation fraction.
The denominator is .
Next determine the numerator for each year.
Since the number of years of life remaining at the beginning of any year is the numerator, the numerator for the first year is . Under the sum-of -the-years'-digits method, an asset having a life of years is assumed to lose of its value the first year.
Therefore, the sum-of -the-years'-digits fraction for the first year is .

Question 4

Using the double-declining-balance method of depreciation, what is the book value at the end of the third year? ____________

Question 5

FORD MOTOR COMPANYy
www.ford.com
Facts :
• 1925: Price of first Ford truck was $281
• 1950s: Cars styled for more comfort
• 2003: Celebrates 100th anniversary
• 2009-10: Weathers financial crisis without government help
In 1903, with $28,000 in cash, Henry Ford started Ford Motor Company, which is now one of the world's largest companies. Ford's greatest contribution to automobile manufacturing was the moving assembly that allowed individual workers to stay in one place and perform the same task on each vehicle as it passed by. The moving assembly line allowed Ford to cut costs and reduce prices of new automobiles so that average working families could afford them. Today, the Ford Motor Company sells a variety of vehicles under the Ford and Lincoln brands.
Capital Curb and Concrete purchased a new Ford truck for $26,500 to be used by the sales manager, who often drives to construction sites to work with customers. The firm's accountant believes that the useful life of the truck is 5 years and that the estimated salvage value is $4500.
Find the book value of the truck at the end of 3 years using the double-declining-balance method of depreciation. ____________

Question 6

To help you review, the numbers in brackets show the section in which the topic was discussed.
Find the annual straight-line and double-declining-balance rates (percents) of depreciation and the sum-of-the-years '-digits fraction for the first year estimated lives.

Question 7

With the sum-of-the-years'-digits method of depreciation, what is the accumulated depreciation at the end of 3 years? ____________

Question 8

FORD MOTOR COMPANYy
www.ford.com
Facts :
• 1925: Price of first Ford truck was $281
• 1950s: Cars styled for more comfort
• 2003: Celebrates 100th anniversary
• 2009-10: Weathers financial crisis without government help
In 1903, with $28,000 in cash, Henry Ford started Ford Motor Company, which is now one of the world's largest companies. Ford's greatest contribution to automobile manufacturing was the moving assembly that allowed individual workers to stay in one place and perform the same task on each vehicle as it passed by. The moving assembly line allowed Ford to cut costs and reduce prices of new automobiles so that average working families could afford them. Today, the Ford Motor Company sells a variety of vehicles under the Ford and Lincoln brands.
Capital Curb and Concrete purchased a new Ford truck for $26,500 to be used by the sales manager, who often drives to construction sites to work with customers. The firm's accountant believes that the useful life of the truck is 5 years and that the estimated salvage value is $4500.
The company also spent $118,350 to purchase a truck that hauls concrete. Which method of depreciation must it use when calculating federal income taxes? What is the appropriate recovery class? Use this information for all of this exercises. ____________

Question 9

To help you review, the numbers in brackets show the section in which the topic was discussed.
Find the annual straight-line and double-declining-balance rates (percents) of depreciation and the sum-of-the-years '-digits fraction for the first year estimated lives.

Question 10

What amount of depreciation will be taken in year 4 with each of the methods? ____________

Question 11

FORD MOTOR COMPANYy
www.ford.com
Facts :
• 1925: Price of first Ford truck was $281
• 1950s: Cars styled for more comfort
• 2003: Celebrates 100th anniversary
• 2009-10: Weathers financial crisis without government help
In 1903, with $28,000 in cash, Henry Ford started Ford Motor Company, which is now one of the world's largest companies. Ford's greatest contribution to automobile manufacturing was the moving assembly that allowed individual workers to stay in one place and perform the same task on each vehicle as it passed by. The moving assembly line allowed Ford to cut costs and reduce prices of new automobiles so that average working families could afford them. Today, the Ford Motor Company sells a variety of vehicles under the Ford and Lincoln brands.
Capital Curb and Concrete purchased a new Ford truck for $26,500 to be used by the sales manager, who often drives to construction sites to work with customers. The firm's accountant believes that the useful life of the truck is 5 years and that the estimated salvage value is $4500.
Find the annual depreciation, for each of the first three years, rounded to the nearest dollar. ____________

Question 12

To help you review, the numbers in brackets show the section in which the topic was discussed.
Find the annual straight-line and double-declining-balance rates (percents) of depreciation and the sum-of-the-years '-digits fraction for the first year estimated lives.

Question 13

FORD MOTOR COMPANYy
www.ford.com
Facts :
• 1925: Price of first Ford truck was $281
• 1950s: Cars styled for more comfort
• 2003: Celebrates 100th anniversary
• 2009-10: Weathers financial crisis without government help
In 1903, with $28,000 in cash, Henry Ford started Ford Motor Company, which is now one of the world's largest companies. Ford's greatest contribution to automobile manufacturing was the moving assembly that allowed individual workers to stay in one place and perform the same task on each vehicle as it passed by. The moving assembly line allowed Ford to cut costs and reduce prices of new automobiles so that average working families could afford them. Today, the Ford Motor Company sells a variety of vehicles under the Ford and Lincoln brands.
Capital Curb and Concrete purchased a new Ford truck for $26,500 to be used by the sales manager, who often drives to construction sites to work with customers. The firm's accountant believes that the useful life of the truck is 5 years and that the estimated salvage value is $4500.
Find the book value at the end of the third year. ____________

Question 14

Solve this application problems. Round to the nearest dollar.
Cloverdale Creamery purchased a soft-serve ice cream maker at a cost of $82,000. The machine has an estimated life of 10 years and a scrap value of $3000. Use the straight-line method of depreciation to find the annual depreciation. ____________

Question 15

FORD MOTOR COMPANYy
www.ford.com
Facts :
• 1925: Price of first Ford truck was $281
• 1950s: Cars styled for more comfort
• 2003: Celebrates 100th anniversary
• 2009-10: Weathers financial crisis without government help
In 1903, with $28,000 in cash, Henry Ford started Ford Motor Company, which is now one of the world's largest companies. Ford's greatest contribution to automobile manufacturing was the moving assembly that allowed individual workers to stay in one place and perform the same task on each vehicle as it passed by. The moving assembly line allowed Ford to cut costs and reduce prices of new automobiles so that average working families could afford them. Today, the Ford Motor Company sells a variety of vehicles under the Ford and Lincoln brands.
Capital Curb and Concrete purchased a new Ford truck for $26,500 to be used by the sales manager, who often drives to construction sites to work with customers. The firm's accountant believes that the useful life of the truck is 5 years and that the estimated salvage value is $4500.
Find the percent of the total depreciation that is taken in the first three years. Round to the nearest tenth of a percent. ____________

Question 16

Solve this application problems. Round to the nearest dollar.
Capital Curb and Concrete purchased a new dump truck for $38,000. If the estimated life of the dump truck is 8 years, find the book value at the end of 2 years using the double-declining-balance method of depreciation. ____________

Question 17

FORD MOTOR COMPANYy
www.ford.com
Facts :
• 1925: Price of first Ford truck was $281
• 1950s: Cars styled for more comfort
• 2003: Celebrates 100th anniversary
• 2009-10: Weathers financial crisis without government help
In 1903, with $28,000 in cash, Henry Ford started Ford Motor Company, which is now one of the world's largest companies. Ford's greatest contribution to automobile manufacturing was the moving assembly that allowed individual workers to stay in one place and perform the same task on each vehicle as it passed by. The moving assembly line allowed Ford to cut costs and reduce prices of new automobiles so that average working families could afford them. Today, the Ford Motor Company sells a variety of vehicles under the Ford and Lincoln brands.
Capital Curb and Concrete purchased a new Ford truck for $26,500 to be used by the sales manager, who often drives to construction sites to work with customers. The firm's accountant believes that the useful life of the truck is 5 years and that the estimated salvage value is $4500.
What is the depreciation in the year after book value reaches salvage value? ____________

Question 18

Solve this application problems. Round to the nearest dollar.
Feather River Youth Camp purchased a diesel generator for $8250. Use the sum-of-the-years'-digits method of depreciation to determine the amount of depreciation to be taken during each of the 4 years on the diesel generator that has a 4-year life and a scrap value of $1500.
Year 1: _________
Year 2: _________
Year 3: _________
Year 4: _________

Question 19

Solve this application problems. Round to the nearest dollar.
A private road costs $56,000 and has a 15-year recovery period. Find the depreciation in the third year using the MACRS method of depreciation. ____________

Question 20

Solve this application problems. Round to the nearest dollar.
One water filter at Micro Brew costs $74,000, has an estimated life of 20 years, and has an estimated scrap value of $12,000. Use the straight-line method of depreciation to find the book value of the machinery at the end of 10 years. ____________

Question 21

Solve this application problems. Round to the nearest dollar.
Gold's Gym has added paging and intercom features to the communication systems of four stores at a cost of $2800 per store. The estimated life of the systems is 10 years, with no expected salvage value. Using the sum-of-the-years'-digits method of depreciation, find the total book value of all the systems at the end of the third year. ____________

Question 22

Solve this application problems. Round to the nearest dollar.
Table Fresh Foods purchased a machine to package its presliced garden salads. The machine costs $20,100 and has an estimated life of 30,000 hours and a salvage value of $1500. Use the units-of-production method of depreciation to find (a) the annual amount of depreciation ____________and (b) the book value at the end of each year, given this use information: year 1: 7800 hours; year 2: 4300 hours; year 3: 4850 hours; year 4: 7600 hours. ____________

Question 23

Solve this application problems. Round to the nearest dollar.
The Rice Growers Cooperative paid $2,800,000 to build a new rice-drying plant. The recovery period is 39 years. Use the MACRS method of depreciation to find the book value of the rice-drying plant at the end of the fifth year. ____________

Question 24

Find the annual straight-line rate of depreciation, given this estimated lives. (See Example.)
Finding First-Year Depreciation and Book Value
KFC purchased a new low-fat chicken cooker at a cost of $26,500. The estimated life of the fryer is 5 years, with a salvage value of $3500. Find (a) the annual rate of depreciation, (b) the annual amount of depreciation, and (c) the book value at the end of the first year.
SOLUTION
(a) The annual rate of depreciation is 20,(5 year life= per year=20%)
$26,500 cost
(b)
This $23,000 will be depreciated evenly over the 5-year life for an annual depreciation of $4600 ($23,000 × 20, = $4600).
(c) Since the annual depreciation is $4600, the book value at the end of the first year will be
$26,500 cost
To solve Example using a calculator, first use parentheses to find the depreciable amount. Next, divide to find depreciation. Finally, find the book value.
Note: Refer to Appendix B for calculator basics.

Question 25

Find the annual straight-line rate of depreciation, given this estimated lives. (See Example.)
Finding First-Year Depreciation and Book Value
KFC purchased a new low-fat chicken cooker at a cost of $26,500. The estimated life of the fryer is 5 years, with a salvage value of $3500. Find (a) the annual rate of depreciation, (b) the annual amount of depreciation, and (c) the book value at the end of the first year.
SOLUTION
(a) The annual rate of depreciation is 20,(5 year life= per year=20%)
$26,500 cost
(b)
This $23,000 will be depreciated evenly over the 5-year life for an annual depreciation of $4600 ($23,000 × 20, = $4600).
(c) Since the annual depreciation is $4600, the book value at the end of the first year will be
$26,500 cost
To solve Example using a calculator, first use parentheses to find the depreciable amount. Next, divide to find depreciation. Finally, find the book value.
Note: Refer to Appendix B for calculator basics.

Question 26

Find the annual straight-line rate of depreciation, given this estimated lives. (See Example.)
Finding First-Year Depreciation and Book Value
KFC purchased a new low-fat chicken cooker at a cost of $26,500. The estimated life of the fryer is 5 years, with a salvage value of $3500. Find (a) the annual rate of depreciation, (b) the annual amount of depreciation, and (c) the book value at the end of the first year.
SOLUTION
(a) The annual rate of depreciation is 20,(5 year life= per year=20%)
$26,500 cost
(b)
This $23,000 will be depreciated evenly over the 5-year life for an annual depreciation of $4600 ($23,000 × 20, = $4600).
(c) Since the annual depreciation is $4600, the book value at the end of the first year will be
$26,500 cost
To solve Example using a calculator, first use parentheses to find the depreciable amount. Next, divide to find depreciation. Finally, find the book value.
Note: Refer to Appendix B for calculator basics.

Question 27

Find the annual straight-line rate of depreciation, given this estimated lives. (See Example.)
Finding First-Year Depreciation and Book Value
KFC purchased a new low-fat chicken cooker at a cost of $26,500. The estimated life of the fryer is 5 years, with a salvage value of $3500. Find (a) the annual rate of depreciation, (b) the annual amount of depreciation, and (c) the book value at the end of the first year.
SOLUTION
(a) The annual rate of depreciation is 20,(5 year life= per year=20%)
$26,500 cost
(b)
This $23,000 will be depreciated evenly over the 5-year life for an annual depreciation of $4600 ($23,000 × 20, = $4600).
(c) Since the annual depreciation is $4600, the book value at the end of the first year will be
$26,500 cost
To solve Example using a calculator, first use parentheses to find the depreciable amount. Next, divide to find depreciation. Finally, find the book value.
Note: Refer to Appendix B for calculator basics.

Question 28

Find the annual straight-line rate of depreciation, given this estimated lives. (See Example.)
Finding First-Year Depreciation and Book Value
KFC purchased a new low-fat chicken cooker at a cost of $26,500. The estimated life of the fryer is 5 years, with a salvage value of $3500. Find (a) the annual rate of depreciation, (b) the annual amount of depreciation, and (c) the book value at the end of the first year.
SOLUTION
(a) The annual rate of depreciation is 20,(5 year life= per year=20%)
$26,500 cost
(b)
This $23,000 will be depreciated evenly over the 5-year life for an annual depreciation of $4600 ($23,000 × 20, = $4600).
(c) Since the annual depreciation is $4600, the book value at the end of the first year will be
$26,500 cost
To solve Example using a calculator, first use parentheses to find the depreciable amount. Next, divide to find depreciation. Finally, find the book value.
Note: Refer to Appendix B for calculator basics.

Question 29

Find the annual straight-line rate of depreciation, given this estimated lives. (See Example.)
Finding First-Year Depreciation and Book Value
KFC purchased a new low-fat chicken cooker at a cost of $26,500. The estimated life of the fryer is 5 years, with a salvage value of $3500. Find (a) the annual rate of depreciation, (b) the annual amount of depreciation, and (c) the book value at the end of the first year.
SOLUTION
(a) The annual rate of depreciation is 20,(5 year life= per year=20%)
$26,500 cost
(b)
This $23,000 will be depreciated evenly over the 5-year life for an annual depreciation of $4600 ($23,000 × 20, = $4600).
(c) Since the annual depreciation is $4600, the book value at the end of the first year will be
$26,500 cost
To solve Example using a calculator, first use parentheses to find the depreciable amount. Next, divide to find depreciation. Finally, find the book value.
Note: Refer to Appendix B for calculator basics.

Question 30

Find the annual straight-line rate of depreciation, given this estimated lives. (See Example.)
Finding First-Year Depreciation and Book Value
KFC purchased a new low-fat chicken cooker at a cost of $26,500. The estimated life of the fryer is 5 years, with a salvage value of $3500. Find (a) the annual rate of depreciation, (b) the annual amount of depreciation, and (c) the book value at the end of the first year.
SOLUTION
(a) The annual rate of depreciation is 20,(5 year life= per year=20%)
$26,500 cost
(b)
This $23,000 will be depreciated evenly over the 5-year life for an annual depreciation of $4600 ($23,000 × 20, = $4600).
(c) Since the annual depreciation is $4600, the book value at the end of the first year will be
$26,500 cost
To solve Example using a calculator, first use parentheses to find the depreciable amount. Next, divide to find depreciation. Finally, find the book value.
Note: Refer to Appendix B for calculator basics.

Question 31

Find the annual straight-line rate of depreciation, given this estimated lives. (See Example.)
Finding First-Year Depreciation and Book Value
KFC purchased a new low-fat chicken cooker at a cost of $26,500. The estimated life of the fryer is 5 years, with a salvage value of $3500. Find (a) the annual rate of depreciation, (b) the annual amount of depreciation, and (c) the book value at the end of the first year.
SOLUTION
(a) The annual rate of depreciation is 20,(5 year life= per year=20%)
$26,500 cost
(b)
This $23,000 will be depreciated evenly over the 5-year life for an annual depreciation of $4600 ($23,000 × 20, = $4600).
(c) Since the annual depreciation is $4600, the book value at the end of the first year will be
$26,500 cost
To solve Example using a calculator, first use parentheses to find the depreciable amount. Next, divide to find depreciation. Finally, find the book value.
Note: Refer to Appendix B for calculator basics.

Question 32

Find the annual straight-line rate of depreciation, given this estimated lives. (See Example.)
Finding First-Year Depreciation and Book Value
KFC purchased a new low-fat chicken cooker at a cost of $26,500. The estimated life of the fryer is 5 years, with a salvage value of $3500. Find (a) the annual rate of depreciation, (b) the annual amount of depreciation, and (c) the book value at the end of the first year.
SOLUTION
(a) The annual rate of depreciation is 20,(5 year life= per year=20%)
$26,500 cost
(b)
This $23,000 will be depreciated evenly over the 5-year life for an annual depreciation of $4600 ($23,000 × 20, = $4600).
(c) Since the annual depreciation is $4600, the book value at the end of the first year will be
$26,500 cost
To solve Example using a calculator, first use parentheses to find the depreciable amount. Next, divide to find depreciation. Finally, find the book value.
Note: Refer to Appendix B for calculator basics.

Question 33

Find the annual straight-line rate of depreciation, given this estimated lives. (See Example.)
Finding First-Year Depreciation and Book Value
KFC purchased a new low-fat chicken cooker at a cost of $26,500. The estimated life of the fryer is 5 years, with a salvage value of $3500. Find (a) the annual rate of depreciation, (b) the annual amount of depreciation, and (c) the book value at the end of the first year.
SOLUTION
(a) The annual rate of depreciation is 20,(5 year life= per year=20%)
$26,500 cost
(b)
This $23,000 will be depreciated evenly over the 5-year life for an annual depreciation of $4600 ($23,000 × 20, = $4600).
(c) Since the annual depreciation is $4600, the book value at the end of the first year will be
$26,500 cost
To solve Example using a calculator, first use parentheses to find the depreciable amount. Next, divide to find depreciation. Finally, find the book value.
Note: Refer to Appendix B for calculator basics.

Question 34

Find the annual amount of depreciation for this, using the straight-line method. (See Examples.)
Finding First-Year Depreciation and Book Value
KFC purchased a new low-fat chicken cooker at a cost of $26,500. The estimated life of the fryer is 5 years, with a salvage value of $3500. Find (a) the annual rate of depreciation, (b) the annual amount of depreciation, and (c) the book value at the end of the first year.
SOLUTION
(a) The annual rate of depreciation is 20,(5 year life= per year=20%)
$26,500 cost
(b)
This $23,000 will be depreciated evenly over the 5-year life for an annual depreciation of $4600 ($23,000 × 20, = $4600).
(c) Since the annual depreciation is $4600, the book value at the end of the first year will be
$26,500 cost
To solve Example using a calculator, first use parentheses to find the depreciable amount. Next, divide to find depreciation. Finally, find the book value.
Note: Refer to Appendix B for calculator basics.
Finding the Book Value at the End of Any Year
A lighted display case at Albertson's cost $3400, has an estimated life of 10 years, and has a salvage value of $800. Find the book value at the end of 6 years.
Quick TIP
The book value helps the owner of a business estimate the value of the business, which is important when the owner is borrowing money or trying to sell the business.
SOLUTION
The annual rate of depreciation is 10, (10-year life is or 10%).
Find the book value at the end of 6 years by subtracting the accumulated depreciation from the cost.
After 6 years, this display case would be carried on the firm's books with a value of $1840.

Question 35

Find the annual amount of depreciation for this, using the straight-line method. (See Examples.)
Finding First-Year Depreciation and Book Value
KFC purchased a new low-fat chicken cooker at a cost of $26,500. The estimated life of the fryer is 5 years, with a salvage value of $3500. Find (a) the annual rate of depreciation, (b) the annual amount of depreciation, and (c) the book value at the end of the first year.
SOLUTION
(a) The annual rate of depreciation is 20,(5 year life= per year=20%)
$26,500 cost
(b)
This $23,000 will be depreciated evenly over the 5-year life for an annual depreciation of $4600 ($23,000 × 20, = $4600).
(c) Since the annual depreciation is $4600, the book value at the end of the first year will be
$26,500 cost
To solve Example using a calculator, first use parentheses to find the depreciable amount. Next, divide to find depreciation. Finally, find the book value.
Note: Refer to Appendix B for calculator basics.
Finding the Book Value at the End of Any Year
A lighted display case at Albertson's cost $3400, has an estimated life of 10 years, and has a salvage value of $800. Find the book value at the end of 6 years.
Quick TIP
The book value helps the owner of a business estimate the value of the business, which is important when the owner is borrowing money or trying to sell the business.
SOLUTION
The annual rate of depreciation is 10, (10-year life is or 10%).
Find the book value at the end of 6 years by subtracting the accumulated depreciation from the cost.
After 6 years, this display case would be carried on the firm's books with a value of $1840.

Question 36

Find the annual amount of depreciation for this, using the straight-line method. (See Examples.)
Finding First-Year Depreciation and Book Value
KFC purchased a new low-fat chicken cooker at a cost of $26,500. The estimated life of the fryer is 5 years, with a salvage value of $3500. Find (a) the annual rate of depreciation, (b) the annual amount of depreciation, and (c) the book value at the end of the first year.
SOLUTION
(a) The annual rate of depreciation is 20,(5 year life= per year=20%)
$26,500 cost
(b)
This $23,000 will be depreciated evenly over the 5-year life for an annual depreciation of $4600 ($23,000 × 20, = $4600).
(c) Since the annual depreciation is $4600, the book value at the end of the first year will be
$26,500 cost
To solve Example using a calculator, first use parentheses to find the depreciable amount. Next, divide to find depreciation. Finally, find the book value.
Note: Refer to Appendix B for calculator basics.
Finding the Book Value at the End of Any Year
A lighted display case at Albertson's cost $3400, has an estimated life of 10 years, and has a salvage value of $800. Find the book value at the end of 6 years.
Quick TIP
The book value helps the owner of a business estimate the value of the business, which is important when the owner is borrowing money or trying to sell the business.
SOLUTION
The annual rate of depreciation is 10, (10-year life is or 10%).
Find the book value at the end of 6 years by subtracting the accumulated depreciation from the cost.
After 6 years, this display case would be carried on the firm's books with a value of $1840.

Question 37

Find the annual amount of depreciation for this, using the straight-line method. (See Examples.)
Finding First-Year Depreciation and Book Value
KFC purchased a new low-fat chicken cooker at a cost of $26,500. The estimated life of the fryer is 5 years, with a salvage value of $3500. Find (a) the annual rate of depreciation, (b) the annual amount of depreciation, and (c) the book value at the end of the first year.
SOLUTION
(a) The annual rate of depreciation is 20,(5 year life= per year=20%)
$26,500 cost
(b)
This $23,000 will be depreciated evenly over the 5-year life for an annual depreciation of $4600 ($23,000 × 20, = $4600).
(c) Since the annual depreciation is $4600, the book value at the end of the first year will be
$26,500 cost
To solve Example using a calculator, first use parentheses to find the depreciable amount. Next, divide to find depreciation. Finally, find the book value.
Note: Refer to Appendix B for calculator basics.
Finding the Book Value at the End of Any Year
A lighted display case at Albertson's cost $3400, has an estimated life of 10 years, and has a salvage value of $800. Find the book value at the end of 6 years.
Quick TIP
The book value helps the owner of a business estimate the value of the business, which is important when the owner is borrowing money or trying to sell the business.
SOLUTION
The annual rate of depreciation is 10, (10-year life is or 10%).
Find the book value at the end of 6 years by subtracting the accumulated depreciation from the cost.
After 6 years, this display case would be carried on the firm's books with a value of $1840.

Question 38

Find the book value at the end of the first year for this, using the straight-line method. (See Examples.)
Finding First-Year Depreciation and Book Value
KFC purchased a new low-fat chicken cooker at a cost of $26,500. The estimated life of the fryer is 5 years, with a salvage value of $3500. Find (a) the annual rate of depreciation, (b) the annual amount of depreciation, and (c) the book value at the end of the first year.
SOLUTION
(a) The annual rate of depreciation is 20,(5 year life= per year=20%)
$26,500 cost
(b)
This $23,000 will be depreciated evenly over the 5-year life for an annual depreciation of $4600 ($23,000 × 20, = $4600).
(c) Since the annual depreciation is $4600, the book value at the end of the first year will be
$26,500 cost
To solve Example using a calculator, first use parentheses to find the depreciable amount. Next, divide to find depreciation. Finally, find the book value.
Note: Refer to Appendix B for calculator basics.
Finding the Book Value at the End of Any Year
A lighted display case at Albertson's cost $3400, has an estimated life of 10 years, and has a salvage value of $800. Find the book value at the end of 6 years.
Quick TIP
The book value helps the owner of a business estimate the value of the business, which is important when the owner is borrowing money or trying to sell the business.
SOLUTION
The annual rate of depreciation is 10, (10-year life is or 10%).
Find the book value at the end of 6 years by subtracting the accumulated depreciation from the cost.
After 6 years, this display case would be carried on the firm's books with a value of $1840.

Question 39

Find the book value at the end of the first year for this, using the straight-line method. (See Examples.)
Finding First-Year Depreciation and Book Value
KFC purchased a new low-fat chicken cooker at a cost of $26,500. The estimated life of the fryer is 5 years, with a salvage value of $3500. Find (a) the annual rate of depreciation, (b) the annual amount of depreciation, and (c) the book value at the end of the first year.
SOLUTION
(a) The annual rate of depreciation is 20,(5 year life= per year=20%)
$26,500 cost
(b)
This $23,000 will be depreciated evenly over the 5-year life for an annual depreciation of $4600 ($23,000 × 20, = $4600).
(c) Since the annual depreciation is $4600, the book value at the end of the first year will be
$26,500 cost
To solve Example using a calculator, first use parentheses to find the depreciable amount. Next, divide to find depreciation. Finally, find the book value.
Note: Refer to Appendix B for calculator basics.
Finding the Book Value at the End of Any Year
A lighted display case at Albertson's cost $3400, has an estimated life of 10 years, and has a salvage value of $800. Find the book value at the end of 6 years.
Quick TIP
The book value helps the owner of a business estimate the value of the business, which is important when the owner is borrowing money or trying to sell the business.
SOLUTION
The annual rate of depreciation is 10, (10-year life is or 10%).
Find the book value at the end of 6 years by subtracting the accumulated depreciation from the cost.
After 6 years, this display case would be carried on the firm's books with a value of $1840.

Question 40

Find the book value at the end of the first year for this, using the straight-line method. (See Examples.)
Finding First-Year Depreciation and Book Value
KFC purchased a new low-fat chicken cooker at a cost of $26,500. The estimated life of the fryer is 5 years, with a salvage value of $3500. Find (a) the annual rate of depreciation, (b) the annual amount of depreciation, and (c) the book value at the end of the first year.
SOLUTION
(a) The annual rate of depreciation is 20,(5 year life= per year=20%)
$26,500 cost
(b)
This $23,000 will be depreciated evenly over the 5-year life for an annual depreciation of $4600 ($23,000 × 20, = $4600).
(c) Since the annual depreciation is $4600, the book value at the end of the first year will be
$26,500 cost
To solve Example using a calculator, first use parentheses to find the depreciable amount. Next, divide to find depreciation. Finally, find the book value.
Note: Refer to Appendix B for calculator basics.
Finding the Book Value at the End of Any Year
A lighted display case at Albertson's cost $3400, has an estimated life of 10 years, and has a salvage value of $800. Find the book value at the end of 6 years.
Quick TIP
The book value helps the owner of a business estimate the value of the business, which is important when the owner is borrowing money or trying to sell the business.
SOLUTION
The annual rate of depreciation is 10, (10-year life is or 10%).
Find the book value at the end of 6 years by subtracting the accumulated depreciation from the cost.
After 6 years, this display case would be carried on the firm's books with a value of $1840.

Question 41

Find the book value at the end of 5 years for this, using the straight-line method. (See Examples.)
Finding First-Year Depreciation and Book Value
KFC purchased a new low-fat chicken cooker at a cost of $26,500. The estimated life of the fryer is 5 years, with a salvage value of $3500. Find (a) the annual rate of depreciation, (b) the annual amount of depreciation, and (c) the book value at the end of the first year.
SOLUTION
(a) The annual rate of depreciation is 20,(5 year life= per year=20%)
$26,500 cost
(b)
This $23,000 will be depreciated evenly over the 5-year life for an annual depreciation of $4600 ($23,000 × 20, = $4600).
(c) Since the annual depreciation is $4600, the book value at the end of the first year will be
$26,500 cost
To solve Example using a calculator, first use parentheses to find the depreciable amount. Next, divide to find depreciation. Finally, find the book value.
Note: Refer to Appendix B for calculator basics.
Finding the Book Value at the End of Any Year
A lighted display case at Albertson's cost $3400, has an estimated life of 10 years, and has a salvage value of $800. Find the book value at the end of 6 years.
Quick TIP
The book value helps the owner of a business estimate the value of the business, which is important when the owner is borrowing money or trying to sell the business.
SOLUTION
The annual rate of depreciation is 10, (10-year life is or 10%).
Find the book value at the end of 6 years by subtracting the accumulated depreciation from the cost.
After 6 years, this display case would be carried on the firm's books with a value of $1840.

Question 42

Find the book value at the end of 5 years for this, using the straight-line method. (See Examples.)
Finding First-Year Depreciation and Book Value
KFC purchased a new low-fat chicken cooker at a cost of $26,500. The estimated life of the fryer is 5 years, with a salvage value of $3500. Find (a) the annual rate of depreciation, (b) the annual amount of depreciation, and (c) the book value at the end of the first year.
SOLUTION
(a) The annual rate of depreciation is 20,(5 year life= per year=20%)
$26,500 cost
(b)
This $23,000 will be depreciated evenly over the 5-year life for an annual depreciation of $4600 ($23,000 × 20, = $4600).
(c) Since the annual depreciation is $4600, the book value at the end of the first year will be
$26,500 cost
To solve Example using a calculator, first use parentheses to find the depreciable amount. Next, divide to find depreciation. Finally, find the book value.
Note: Refer to Appendix B for calculator basics.
Finding the Book Value at the End of Any Year
A lighted display case at Albertson's cost $3400, has an estimated life of 10 years, and has a salvage value of $800. Find the book value at the end of 6 years.
Quick TIP
The book value helps the owner of a business estimate the value of the business, which is important when the owner is borrowing money or trying to sell the business.
SOLUTION
The annual rate of depreciation is 10, (10-year life is or 10%).
Find the book value at the end of 6 years by subtracting the accumulated depreciation from the cost.
After 6 years, this display case would be carried on the firm's books with a value of $1840.

Question 43

Find the book value at the end of 5 years for this, using the straight-line method. (See Examples.)
Finding First-Year Depreciation and Book Value
KFC purchased a new low-fat chicken cooker at a cost of $26,500. The estimated life of the fryer is 5 years, with a salvage value of $3500. Find (a) the annual rate of depreciation, (b) the annual amount of depreciation, and (c) the book value at the end of the first year.
SOLUTION
(a) The annual rate of depreciation is 20,(5 year life= per year=20%)
$26,500 cost
(b)
This $23,000 will be depreciated evenly over the 5-year life for an annual depreciation of $4600 ($23,000 × 20, = $4600).
(c) Since the annual depreciation is $4600, the book value at the end of the first year will be
$26,500 cost
To solve Example using a calculator, first use parentheses to find the depreciable amount. Next, divide to find depreciation. Finally, find the book value.
Note: Refer to Appendix B for calculator basics.
Finding the Book Value at the End of Any Year
A lighted display case at Albertson's cost $3400, has an estimated life of 10 years, and has a salvage value of $800. Find the book value at the end of 6 years.
Quick TIP
The book value helps the owner of a business estimate the value of the business, which is important when the owner is borrowing money or trying to sell the business.
SOLUTION
The annual rate of depreciation is 10, (10-year life is or 10%).
Find the book value at the end of 6 years by subtracting the accumulated depreciation from the cost.
After 6 years, this display case would be carried on the firm's books with a value of $1840.

Question 44

Solve this application problems.
LABORATORY EQUIPMENT Taconic Medical purchased new lab equipment costing $18,000, having an estimated life of 4 years and a salvage value of $1600. Prepare a depreciation schedule using the straight-line method of depreciation.

Question 45

Solve this application problems.
VEHICLE DEPRECIATION Capital Curb and Concrete paid $51,200 for a -ton, dualaxle flatbed truck with an estimated life of 6 years and a salvage value of $14,000. Prepare a depreciation schedule using the straight-line method of depreciation.

Question 46

Solve this application problems.
BUSINESS FIXTURES The Venture Center purchased a new commercial air conditioner at a cost of $7800 and estimates the useful life as 10 years, after which it will have no salvage value. Prepare a depreciation schedule, calculating depreciation by the straight-line method.

Question 47

Solve this application problems.
Develop a single formula that will show how to find annual depreciation using the straight-line method of depreciation. (See Objective.)
Understand the terms used in depreciation. The physical assets of a company such as machinery, trucks, cars, and computers are tangible assets. Assets such as patents and copyrights, franchise fees, and customer lists are intangible assets. In general, either type of asset may be depreciated, as long as its useful life can be determined. The key terms in depreciation are summarized below.
Cost is the basis for determining depreciation. It is the total amount paid for the asset. Useful life is the period of time during which the asset will be used. The Internal Revenue Service has guidelines for estimating the life of an asset used in a particular trade or business. However, useful life depends on the use of the asset, the repair policy, the replacement policy, obsolescence, and other factors.
Salvage value or scrap value (sometimes called residual value ) is the estimated value of an asset when it is retired from service, traded in, disposed of, or exhausted. An asset may have a salvage value of zero, or no salvage value.
Accumulated depreciation is the amount of depreciation taken so far, a running balance of depreciation to date.
Book value is the cost of an asset minus the total depreciation to date. The book value at the end of an asset's life is equal to the salvage value. The book value can never be less than the salvage value.

Question 48

Solve this application problems.
Explain the procedure used to calculate depreciation when there is no salvage value. Why will the book value always be zero at the end of the asset's life?

Question 49

Solve this application problems.
BARGE DEPRECIATION A Dutch petroleum company purchased a barge for $1,300,000. The estimated life is 20 years, at which time it will have a salvage value of $200,000. Find (a) the annual amount of depreciation using the straight-line method ____________and (b) the book value at the end of 5 years. ____________

Question 50

Solve this application problems.
DEPRECIATING COMPUTER EQUIPMENT The new computer equipment at Capital Curb and Concrete has a cost of $14,500, an estimated life of 8 years, and a scrap value of $2100. Find (a) the annual depreciation ____________and (b) the book value at the end of 4 years using the straight-line method of depreciation. ____________

Question 51

Solve this application problems.
DEPRECIATING MACHINERY A bottle-capping machine costs $88,000, has an estimated life of 8 years, and has a scrap value of $16,000. Use the straight-line method of depreciation to find (a) the annual rate of depreciation, ____________ (b) the annual amount of depreciation, ____________and (c) the book value at the end of the first year. ____________

Question 52

Solve this application problems.
DRILLING RIG Transocean Drilling spent $236,000,000 to purchase a new offshore drilling rig capable of drilling to 40,000 feet. The useful life is 20 years and the salvage value is estimated to be $12,000,000. Use the straight-line method of depreciation to find ( a ) the annual rate of depreciation, ____________ ( b ) the annual amount of depreciation, ____________and ( c ) the book value at the end of 5 years. ____________

Question 53

Find the annual double-declining-balance (200 , method) rate of depreciation, given this estimated lives. (See Example.)
Finding the 200% Declining-Balance Rate
Find the straight-line rate and the double-declining-balance (200%) rate for each of the following years of life.
SOLUTION

Question 54

Find the annual double-declining-balance (200 , method) rate of depreciation, given this estimated lives. (See Example.)
Finding the 200% Declining-Balance Rate
Find the straight-line rate and the double-declining-balance (200%) rate for each of the following years of life.
SOLUTION

Question 55

Find the annual double-declining-balance (200 , method) rate of depreciation, given this estimated lives. (See Example.)
Finding the 200% Declining-Balance Rate
Find the straight-line rate and the double-declining-balance (200%) rate for each of the following years of life.
SOLUTION

Question 56

Find the annual double-declining-balance (200 , method) rate of depreciation, given this estimated lives. (See Example.)
Finding the 200% Declining-Balance Rate
Find the straight-line rate and the double-declining-balance (200%) rate for each of the following years of life.
SOLUTION

Question 57

Find the annual double-declining-balance (200 , method) rate of depreciation, given this estimated lives. (See Example.)
Finding the 200% Declining-Balance Rate
Find the straight-line rate and the double-declining-balance (200%) rate for each of the following years of life.
SOLUTION

Question 58

Find the annual double-declining-balance (200 , method) rate of depreciation, given this estimated lives. (See Example.)
Finding the 200% Declining-Balance Rate
Find the straight-line rate and the double-declining-balance (200%) rate for each of the following years of life.
SOLUTION

Question 59

Find the annual double-declining-balance (200 , method) rate of depreciation, given this estimated lives. (See Example.)
Finding the 200% Declining-Balance Rate
Find the straight-line rate and the double-declining-balance (200%) rate for each of the following years of life.
SOLUTION

Question 60

Find the annual double-declining-balance (200 , method) rate of depreciation, given this estimated lives. (See Example.)
Finding the 200% Declining-Balance Rate
Find the straight-line rate and the double-declining-balance (200%) rate for each of the following years of life.
SOLUTION

Question 61

Find the annual double-declining-balance (200 , method) rate of depreciation, given this estimated lives. (See Example.)
Finding the 200% Declining-Balance Rate
Find the straight-line rate and the double-declining-balance (200%) rate for each of the following years of life.
SOLUTION

Question 62

Find the annual double-declining-balance (200 , method) rate of depreciation, given this estimated lives. (See Example.)
Finding the 200% Declining-Balance Rate
Find the straight-line rate and the double-declining-balance (200%) rate for each of the following years of life.
SOLUTION

Question 63

Find the first year 's depreciation for this, using the double-declining-balance method of depreciation. (See Example.)
Finding Depreciation and Book Value Using Double-Declining-Balance
Capital Curb and Concrete purchased a small portable storage building for $8100. It is expected to have a life of 10 years, at which time it will have no salvage value. Using the double- declining-balance method of depreciation, find the first and second years' depreciation and the book value at the end of the first and second years.
SOLUTION
The straight-line depreciation rate for property with a 10-year recovery is 10%. Therefore, the double-declining balance rate is twice that, or 10% × 2 = 20%.
Find the book value at the end of the first year as follows.
Book value at end of second year is found as follows.

Question 64

Find the first year 's depreciation for this, using the double-declining-balance method of depreciation. (See Example.)
Finding Depreciation and Book Value Using Double-Declining-Balance
Capital Curb and Concrete purchased a small portable storage building for $8100. It is expected to have a life of 10 years, at which time it will have no salvage value. Using the double- declining-balance method of depreciation, find the first and second years' depreciation and the book value at the end of the first and second years.
SOLUTION
The straight-line depreciation rate for property with a 10-year recovery is 10%. Therefore, the double-declining balance rate is twice that, or 10% × 2 = 20%.
Find the book value at the end of the first year as follows.
Book value at end of second year is found as follows.

Question 65

Find the first year 's depreciation for this, using the double-declining-balance method of depreciation. (See Example.)
Finding Depreciation and Book Value Using Double-Declining-Balance
Capital Curb and Concrete purchased a small portable storage building for $8100. It is expected to have a life of 10 years, at which time it will have no salvage value. Using the double- declining-balance method of depreciation, find the first and second years' depreciation and the book value at the end of the first and second years.
SOLUTION
The straight-line depreciation rate for property with a 10-year recovery is 10%. Therefore, the double-declining balance rate is twice that, or 10% × 2 = 20%.
Find the book value at the end of the first year as follows.
Book value at end of second year is found as follows.

Question 66

Find the first year 's depreciation for this, using the double-declining-balance method of depreciation. (See Example.)
Finding Depreciation and Book Value Using Double-Declining-Balance
Capital Curb and Concrete purchased a small portable storage building for $8100. It is expected to have a life of 10 years, at which time it will have no salvage value. Using the double- declining-balance method of depreciation, find the first and second years' depreciation and the book value at the end of the first and second years.
SOLUTION
The straight-line depreciation rate for property with a 10-year recovery is 10%. Therefore, the double-declining balance rate is twice that, or 10% × 2 = 20%.
Find the book value at the end of the first year as follows.
Book value at end of second year is found as follows.

Question 67

Find the book value at the end of the first year for this, using the double-declining-balance method of depreciation. Round to the nearest dollar. (See Examples.)
Finding the 200% Declining-Balance Rate
Find the straight-line rate and the double-declining-balance (200%) rate for each of the following years of life.
SOLUTION Finding Depreciation and Book Value Using Double-Declining-Balance
Capital Curb and Concrete purchased a small portable storage building for $8100. It is expected to have a life of 10 years, at which time it will have no salvage value. Using the double- declining-balance method of depreciation, find the first and second years' depreciation and the book value at the end of the first and second years.
SOLUTION
The straight-line depreciation rate for property with a 10-year recovery is 10%. Therefore, the double-declining balance rate is twice that, or 10% × 2 = 20%.
Find the book value at the end of the first year as follows.
Book value at end of second year is found as follows.

Question 68

Find the book value at the end of the first year for this, using the double-declining-balance method of depreciation. Round to the nearest dollar. (See Examples.)
Finding the 200% Declining-Balance Rate
Find the straight-line rate and the double-declining-balance (200%) rate for each of the following years of life.
SOLUTION Finding Depreciation and Book Value Using Double-Declining-Balance
Capital Curb and Concrete purchased a small portable storage building for $8100. It is expected to have a life of 10 years, at which time it will have no salvage value. Using the double- declining-balance method of depreciation, find the first and second years' depreciation and the book value at the end of the first and second years.
SOLUTION
The straight-line depreciation rate for property with a 10-year recovery is 10%. Therefore, the double-declining balance rate is twice that, or 10% × 2 = 20%.
Find the book value at the end of the first year as follows.
Book value at end of second year is found as follows.

Question 69

Find the book value at the end of the first year for this, using the double-declining-balance method of depreciation. Round to the nearest dollar. (See Examples.)
Finding the 200% Declining-Balance Rate
Find the straight-line rate and the double-declining-balance (200%) rate for each of the following years of life.
SOLUTION Finding Depreciation and Book Value Using Double-Declining-Balance
Capital Curb and Concrete purchased a small portable storage building for $8100. It is expected to have a life of 10 years, at which time it will have no salvage value. Using the double- declining-balance method of depreciation, find the first and second years' depreciation and the book value at the end of the first and second years.
SOLUTION
The straight-line depreciation rate for property with a 10-year recovery is 10%. Therefore, the double-declining balance rate is twice that, or 10% × 2 = 20%.
Find the book value at the end of the first year as follows.
Book value at end of second year is found as follows.

Question 70

Find the book value at the end of 3 years for this, using the double-declining-balance method of depreciation. Round to the nearest dollar. (See Examples.)
Finding the 200% Declining-Balance Rate
Find the straight-line rate and the double-declining-balance (200%) rate for each of the following years of life.
SOLUTION Finding Depreciation and Book Value Using Double-Declining-Balance
Capital Curb and Concrete purchased a small portable storage building for $8100. It is expected to have a life of 10 years, at which time it will have no salvage value. Using the double- declining-balance method of depreciation, find the first and second years' depreciation and the book value at the end of the first and second years.
SOLUTION
The straight-line depreciation rate for property with a 10-year recovery is 10%. Therefore, the double-declining balance rate is twice that, or 10% × 2 = 20%.
Find the book value at the end of the first year as follows.
Book value at end of second year is found as follows.

Question 71

Find the book value at the end of 3 years for this, using the double-declining-balance method of depreciation. Round to the nearest dollar. (See Examples.)
Finding the 200% Declining-Balance Rate
Find the straight-line rate and the double-declining-balance (200%) rate for each of the following years of life.
SOLUTION Finding Depreciation and Book Value Using Double-Declining-Balance
Capital Curb and Concrete purchased a small portable storage building for $8100. It is expected to have a life of 10 years, at which time it will have no salvage value. Using the double- declining-balance method of depreciation, find the first and second years' depreciation and the book value at the end of the first and second years.
SOLUTION
The straight-line depreciation rate for property with a 10-year recovery is 10%. Therefore, the double-declining balance rate is twice that, or 10% × 2 = 20%.
Find the book value at the end of the first year as follows.
Book value at end of second year is found as follows.

Question 72

Find the book value at the end of 3 years for this, using the double-declining-balance method of depreciation. Round to the nearest dollar. (See Examples.)
Finding the 200% Declining-Balance Rate
Find the straight-line rate and the double-declining-balance (200%) rate for each of the following years of life.
SOLUTION Finding Depreciation and Book Value Using Double-Declining-Balance
Capital Curb and Concrete purchased a small portable storage building for $8100. It is expected to have a life of 10 years, at which time it will have no salvage value. Using the double- declining-balance method of depreciation, find the first and second years' depreciation and the book value at the end of the first and second years.
SOLUTION
The straight-line depreciation rate for property with a 10-year recovery is 10%. Therefore, the double-declining balance rate is twice that, or 10% × 2 = 20%.
Find the book value at the end of the first year as follows.
Book value at end of second year is found as follows.

Question 73

Solve this application problems.
STUDIO SOUND SYSTEM A studio sound system costing $11,760 has a 3-year life and a scrap value of $1400. Prepare a depreciation schedule using the double-declining-balance method of depreciation.

Question 74

Solve this application problems.
CONVEYOR SYSTEM Use the double-declining-balance method of depreciation to prepare a depreciation schedule for a new conveyor. Cost = $14,000; estimated life = 5 years; estimated scrap value = $2500. (Round to the nearest dollar.)

Question 75

Solve this application problems.
ELECTRONIC ANALYZER Neilo Lincoln decides to use the double-declining-balance method of depreciation on an electronic analyzer that was acquired at a cost of $25,500. If the estimated life of the analyzer is 8 years and the estimated scrap value is $3500, prepare a depreciation schedule. (Round to the nearest dollar.)

Question 76

Solve this application problems.
Another name for the double-declining-balance method of depreciation is the 200, method. Explain why the straight-line method of depreciation is often called the 100, method. (See Objective.)
Find the double-declining-balance rate. Calculate depreciation using the double-declining-balance method by first finding the straight-line rate of depreciation. Then adjust the straight-line rate to the desired double-declining-balance rate by multiplying by 2.

Question 77

Solve this application problems.
Explain why the amount of depreciation taken in the last year of an asset's life may be zero when using the double-declining-balance method of depreciation. (See Objective.)
Use the double-declining-balance method to prepare a depreciation schedule. The next example shows a depreciation schedule for the pickup truck discussed in Example of Section. As this example shows, the same rate is used each year with the declining-balance method, and the rate is multiplied by the declining balance, which is last year's book value. Also, the amount of depreciation in a given year may have to be adjusted so that book value is never less than salvage value.

Question 78

Solve this application problems.
CARPET-CLEANING EQUIPMENT John Walker, owner of The Carpet Solution, purchased some truck-mounted carpet-cleaning equipment at a cost of $8200. The estimated life of the equipment is 8 years, and the expected salvage value is $1250. Use the double-declining-balance method of depreciation to find the depreciation in the third year. ____________

Question 79

Solve this application problems.
COMMERCIAL FISHING BOATS A commercial fishing boat costs $717,000 and has an estimated life of 10 years and a salvage value of $225,000. Find the depreciation in the second year using the double-declining-balance method of depreciation. ____________

Question 80

Solve this application problems.
EXCAVATING MACHINERY Reef Tours purchased a fishing boat for $39,240. It has an estimated life of 5 years with no salvage value. Use the double-declining-balance method of depreciation to find the book value at the end of the third year. ____________