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4.4 Depreciation

4.4 Depreciation
  • Math Help

    In Example 4, the salvage value is $25,000. From a practical standpoint, salvage value is often considered to be $0, because its valuation is often small and immaterial. For instance, after 5 years, a certain computer is considered obsolete. So, the computer has a salvage value of $0.

    Spreadsheet for Example 4.

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  • Checkpoint Solution

    Using the spreadsheet from Example 4, you can see that the value expensed during the first 4 years using double declining-balance depreciation was

    data folder

    For straight-line depreciation, the annual depreciation would be

    After 4 years, the total depreciation expense is The spreadsheet below confirms that the total depreciation during the first 4 years is

    data folder

    So, using double declining-balance depreciation, we expensed more during the first 4 years than we would have with straight-line depreciation.

    You can check your work using a depreciation schedule calculator located in Tools.

  • Comments (1)

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    system user
    Guest   1 decade ago |
    From the IRS: "What Property Can Be Depreciated?"
    You can depreciate most types of tangible property (except land), such as buildings, machinery, vehicles, furniture, and equipment. You also can depreciate certain intangible property, such as patents, copyrights, and computer software. To be depreciated, the property must meet all the following requirements.
    * It must be property you own.
    * It must be used in your business or income-producing activity.
    * It must have a determinable useful life.
    * It must be expected to last more than one year.