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Chapter 4 Review Exercises

Chapter 4 Review Exercises
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  • 23. Outdoor Water Park

    You own an outdoor water park and you purchase new equipment. Make a straight-line depreciation schedule for the equipment.

     

    Cost: $2500

    Salvage value: $500

    Useful life: 5 years

    A spreadsheet is available to help you complete this exercise.

    • Worked-Out Solution

      The depreciation each year is

      A spreadsheet showing the depreciation schedule is shown below.

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     __   __     ___     _____      ______   __   _   
     \ \\/ //   / _ \\  |  __ \\   /_   _// | || | || 
      \   //   / //\ \\ | |  \ ||   -| ||-  | '--' || 
      / . \\  |  ___  ||| |__/ ||   _| ||_  | .--. || 
     /_//\_\\ |_||  |_|||_____//   /_____// |_|| |_|| 
     `-`  --` `-`   `-`  -----`    `-----`  `-`  `-`  
                                                      
    
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  • 24. Outdoor Water Park

    You own an outdoor water park and you purchase new equipment. Make a straight-line depreciation schedule for the equipment.

    Cost

    Salvage value

    Useful life

    $4000

    $1200

    7 years

    A spreadsheet is available to help you complete this exercise.

    Comments (0)

    These comments are not screened before publication. Constructive debate about the information on this page is welcome, but personal attacks are not. Please do not post comments that are commercial in nature or that violate copyright. Comments that we regard as obscene, defamatory, or intended to incite violence will be removed. If you find a comment offensive, you may flag it.
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      _____     ______    _  __   _    _      _____  
     /  ___||  /_   _//  | |/ // | || | ||   / ___// 
    | // __     -| ||-   | ' //  | || | ||   \___ \\ 
    | \\_\ ||   _| ||_   | . \\  | \\_/ ||   /    // 
     \____//   /_____//  |_|\_\\  \____//   /____//  
      `---`    `-----`   `-` --`   `---`   `-----`   
                                                     
    
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  • 25. Outdoor Water Park

    You own an outdoor water park and you purchase new equipment. A graph of the double declining-balance depreciation schedule for the equipment is shown. How much depreciation did you expense in year 1?

    • Worked-Out Solution

      From the graph, it appears that you expensed about $14,000 for depreciation the first year.

      The annual rate of decrease is

      This implies that the depreciation for the first year is

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     _    _      ___      ____       ___     _____    
    | |  | ||   / _ \\   |  _ \\    / _ \\  |  __ \\  
    | |/\| ||  | / \ ||  | |_| ||  | / \ || | |  \ || 
    |  /\  ||  | \_/ ||  | .  //   | \_/ || | |__/ || 
    |_// \_||   \___//   |_|\_\\    \___//  |_____//  
    `-`   `-`   `---`    `-` --`    `---`    -----`   
                                                      
    
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  • 26. Outdoor Water Park

    You own an outdoor water park and you purchase new equipment. A graph of the double declining-balance depreciation schedule for the equipment is shown. How much depreciation did you expense in year 7?

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      _  __     ___     _    _     _____    _    _   
     | |/ //   / _ \\  | |  | ||  |  ___|| | \  / || 
     | ' //   / //\ \\ | |/\| ||  | ||__   |  \/  || 
     | . \\  |  ___  |||  /\  ||  | ||__   | .  . || 
     |_|\_\\ |_||  |_|||_// \_||  |_____|| |_|\/|_|| 
     `-` --` `-`   `-` `-`   `-`  `-----`  `-`  `-`  
                                                     
    
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  • 27. Comparing Depreciation Schedules

    You own an outdoor water park and you purchase new equipment. A graph of the double declining-balance depreciation schedule for the equipment is shown. Using double declining-balance depreciation, how much more of the value did you expense during the first 4 years when compared to straight-line depreciation?

    data folder

    • Worked-Out Solution

      The two types of depreciation schedules are shown below.

      Straight-Line Depreciation

      data folder

      Double Declining-Balance Depreciation

       

      Using straight-line depreciation, you depreciated

      during the first 4 years.

      Using double declining-balance depreciation, you depreciated

      during the first 4 years. So, you depreciated

      more using double declining-balance depreciation.

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      ______     ___     _    _     ______   ______   
     /_   _//   / _ \\  | \  / ||  /_   _// |      \\ 
     `-| |,-   / //\ \\ |  \/  ||   -| ||-  |  --  // 
       | ||   |  ___  ||| .  . ||   _| ||_  |  --  \\ 
       |_||   |_||  |_|||_|\/|_||  /_____// |______// 
       `-`'   `-`   `-` `-`  `-`   `-----`  `------`  
                                                      
    
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  • 28. Comparing Depreciation Schedules

    You own an outdoor water park and you purchase new equipment. A graph of the double declining-balance depreciation schedule for the equipment is shown. Suppose you had used sum of the years-digits depreciation instead of double declining-balance depreciation. How much more did you expense during the first 4 years when compared to straight-line depreciation?

    data folder

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      ______     ___     _    _    _    _     ______  
     /_   _//   / _ \\  | \  / || | || | ||  /_____// 
     `-| |,-   / //\ \\ |  \/  || | || | ||  `____ `  
       | ||   |  ___  ||| .  . || | \\_/ ||  /___//   
       |_||   |_||  |_|||_|\/|_||  \____//   `__ `    
       `-`'   `-`   `-` `-`  `-`    `---`    /_//     
                                             `-`      
    
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