A bowling alley costs $500,000 and has a useful life of 10 years. Its estimated MV at the end of year 10 is $20,000. Create a spreadsheet that calculates thedepreciation for years 1–10 using (i) the SL method, (ii) the 200% DB method, and (iii) the MACRS method (GDS class life = 10 years). For each method, compute the PW of the depreciation deductions (at EOY 0). The MARR is 10% per year. If a large PW is desirable, what do you conclude regarding which method is preferred?
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
A bowling alley costs $500,000 and has a useful life of 10 years. Its estimated MV at the end of year 10 is $20,000. Create a spreadsheet that calculates the
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