BA Aerospace purchased new aircraft engine diagnostics equipment for itsmaintenance support facility in France. Installed cost was $500,000 with adepreciable life of 5 years and an estimated 1% salvage. Use a spreadsheet to determine the following:a. Straight line (SL) depreciation and book value schedule.b. Double declining balance (DDB) depreciation and book value schedule.c. Declining balance (DB) at 150% of the SL rate depreciation and book value schedule.d. MACRS depreciation and book value schedule.e. Depreciation and book value schedule allowing a switch from DDB to SLdepreciation.f. One graph that plots the book value curves for all five schedules.
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.
BA Aerospace purchased new aircraft engine diagnostics equipment for its
maintenance support facility in France. Installed cost was $500,000 with a
depreciable life of 5 years and an estimated 1% salvage. Use a spreadsheet to determine the following:
a. Straight line (SL)
b. Double declining balance (DDB) depreciation and book value schedule.
c. Declining balance (DB) at 150% of the SL rate depreciation and book value schedule.
d. MACRS depreciation and book value schedule.
e. Depreciation and book value schedule allowing a switch from DDB to SL
depreciation.
f. One graph that plots the book value
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