i.
MACRS
Answer to Problem 43P
MACRS depreciation is $ 84800.
Explanation of Solution
Given:
Cost of machine = $200000
Useful Life = 10 years.
Calculation:
A 10-year property class with half-yearly convention has been assumed.
| MACRS | ||||
| Year | Depreciation Base ($) | Depreciation Rate (%) | Annual Depreciation ($) | Year-end Book Value ($) |
| 1 | 2,00,000 | 10 | 20,000 | 1,80,000 |
| 2 | 2,00,000 | 18 | 36,000 | 1,44,000 |
| 3 | 2,00,000 | 14.4 | 28,800 | 1,15,200 |
| TOTAL | 84,800 |
Conclusion:
MACRS depreciation is $ 84800.
ii.
Straight Line Depreciation.
Answer to Problem 43P
Straight Line Depreciation is $20000 per annum.
Explanation of Solution
Given:
Cost of machine = $200000
Useful Life = 10 years.
Calculation:
SLM depreciation =
| Year | Beginning-of-year Book Value ($) | Annual Depreciation ($) | Year-end Book Value ($) |
| 1 | 2,00,000 | 20,000 | 1,80,000 |
| 2 | 1,80,000 | 20,000 | 1,60,000 |
| 3 | 1,60,000 | 20,000 | 1,40,000 |
| TOTAL | 60,000 |
Conclusion:
Straight Line Depreciation is $20000 per annum
iii.
Sum-of-years-digit depreciation.
Sum-of-years-digit depreciation is $98182.
Given:
Cost of machine = $200000
Useful Life = 10 years.
Calculation:
Sum-of-years-digit depreciation (SOYD)
Depreciation base = $200,000
Annual depreciation in year N =
| SOYD | ||||
| Year | Depreciation Base ($) | Depreciation Rate | Annual Depreciation ($) | Year-end Book Value ($) |
| 1 | 2,00,000 | 10/55 | 36,364 | 1,63,636 |
| 2 | 2,00,000 | 9/55 | 32,727 | 1,30,909 |
| 3 | 2,00,000 | 8/55 | 29,091 | 1,01,818 |
| TOTAL | 98,182 |
Conclusion:
Sum-of-years-digit depreciation is $98182.
iv.
Double declining balance depreciation.
Double declining balance depreciation is $ 97600.
Given:
Cost of machine = $200000
Useful Life = 10 years.
Calculation:
SLM Depreciation rate =
DDB Rate =
| DDB | ||||
| Year | Depreciation Base ($) | Depreciation Rate | Annual Depreciation ($) | Year-end Book Value ($) |
| 1 | 2,00,000 | 0.2 | 40,000 | 1,60,000 |
| 2 | 1,60,000 | 0.2 | 32,000 | 1,28,000 |
| 3 | 1,28,000 | 0.2 | 25,600 | 1,02,400 |
| TOTAL | 97,600 |
Conclusion:
Double declining balance depreciation is $ 97600
(e).
v.
150% Declining balance depreciation.
150% Declining balance depreciation is $77175.
Given:
Cost of machine = $200000
Useful Life = 10 years.
Calculation:
150% Declining balance depreciation rate = 0.1 x 1.5 = 0.15
| 150% DECLINING BALANCE METHOD | ||||
| Year | Depreciation Base ($) | Depreciation Rate | Annual Depreciation ($) | Year-end Book Value ($) |
| 1 | 2,00,000 | 0.15 | 30,000 | 1,70,000 |
| 2 | 1,70,000 | 0.15 | 25,500 | 1,44,500 |
| 3 | 1,44,500 | 0.15 | 21,675 | 1,22,825 |
| TOTAL | 77,175 |
Conclusion:
150% Declining balance depreciation is $77175.
iii.
Sum-of-years-digit depreciation.
Answer to Problem 43P
Sum-of-years-digit depreciation is $98182.
Explanation of Solution
Given:
Cost of machine = $200000
Useful Life = 10 years.
Calculation:
Sum-of-years-digit depreciation (SOYD)
Depreciation base = $200,000
Annual depreciation in year N =
| SOYD | ||||
| Year | Depreciation Base ($) | Depreciation Rate | Annual Depreciation ($) | Year-end Book Value ($) |
| 1 | 2,00,000 | 10/55 | 36,364 | 1,63,636 |
| 2 | 2,00,000 | 9/55 | 32,727 | 1,30,909 |
| 3 | 2,00,000 | 8/55 | 29,091 | 1,01,818 |
| TOTAL | 98,182 |
Conclusion:
Sum-of-years-digit depreciation is $98182.
iv.
Double declining balance depreciation.
Double declining balance depreciation is $ 97600.
Given:
Cost of machine = $200000
Useful Life = 10 years.
Calculation:
SLM Depreciation rate =
DDB Rate =
| DDB | ||||
| Year | Depreciation Base ($) | Depreciation Rate | Annual Depreciation ($) | Year-end Book Value ($) |
| 1 | 2,00,000 | 0.2 | 40,000 | 1,60,000 |
| 2 | 1,60,000 | 0.2 | 32,000 | 1,28,000 |
| 3 | 1,28,000 | 0.2 | 25,600 | 1,02,400 |
| TOTAL | 97,600 |
Conclusion:
Double declining balance depreciation is $ 97600
(e).
v.
150% Declining balance depreciation.
150% Declining balance depreciation is $77175.
Given:
Cost of machine = $200000
Useful Life = 10 years.
Calculation:
150% Declining balance depreciation rate = 0.1 x 1.5 = 0.15
| 150% DECLINING BALANCE METHOD | ||||
| Year | Depreciation Base ($) | Depreciation Rate | Annual Depreciation ($) | Year-end Book Value ($) |
| 1 | 2,00,000 | 0.15 | 30,000 | 1,70,000 |
| 2 | 1,70,000 | 0.15 | 25,500 | 1,44,500 |
| 3 | 1,44,500 | 0.15 | 21,675 | 1,22,825 |
| TOTAL | 77,175 |
Conclusion:
150% Declining balance depreciation is $77175.
iv.
Double declining balance depreciation.
Answer to Problem 43P
Double declining balance depreciation is $ 97600.
Explanation of Solution
Given:
Cost of machine = $200000
Useful Life = 10 years.
Calculation:
SLM Depreciation rate =
DDB Rate =
| DDB | ||||
| Year | Depreciation Base ($) | Depreciation Rate | Annual Depreciation ($) | Year-end Book Value ($) |
| 1 | 2,00,000 | 0.2 | 40,000 | 1,60,000 |
| 2 | 1,60,000 | 0.2 | 32,000 | 1,28,000 |
| 3 | 1,28,000 | 0.2 | 25,600 | 1,02,400 |
| TOTAL | 97,600 |
Conclusion:
Double declining balance depreciation is $ 97600
(e).
v.
150% Declining balance depreciation.
Answer to Problem 43P
150% Declining balance depreciation is $77175.
Explanation of Solution
Given:
Cost of machine = $200000
Useful Life = 10 years.
Calculation:
150% Declining balance depreciation rate = 0.1 x 1.5 = 0.15
| 150% DECLINING BALANCE METHOD | ||||
| Year | Depreciation Base ($) | Depreciation Rate | Annual Depreciation ($) | Year-end Book Value ($) |
| 1 | 2,00,000 | 0.15 | 30,000 | 1,70,000 |
| 2 | 1,70,000 | 0.15 | 25,500 | 1,44,500 |
| 3 | 1,44,500 | 0.15 | 21,675 | 1,22,825 |
| TOTAL | 77,175 |
Conclusion:
150% Declining balance depreciation is $77175.
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Chapter 11 Solutions
ENGINEERING ECO ALANYSIS W/STUDY GUIDE
- Production efficiency is most concerned with Choice of inputs in production process Quantity of outputs resulting from the production process The technological process of production All of the abovearrow_forwardChoose all of the following that are assumed to be constant while constructing the production possibilities curve Technology Precise mix of inputs Institutional arrangements like judicial protection of business contracts Outputsarrow_forwardA point that lies OUTSIDE of the PPC can be achieved if A major technological innovation increases production efficiency A sudden influx of resources e.g., massive immigration of trained nurses Economic reform resulting in greater protection of intellectual property rights All of the above Only options 1 and 2arrow_forward
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