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4.4 Depreciation

4.4 Depreciation
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  • 7. Construction Equipment Depreciation

    The owner of a construction company buys new equipment.

    Cost: $50,000

    Salvage value: $10,000

    Useful life: 5 years

    Make a double declining-balance depreciation schedule for the equipment. (See Example 3 and Example 4.)

    A spreadsheet is available to help you complete this exercise.

    • Worked-Out Solution

      The annual rate of depreciation is

      A spreadsheet showing the depreciation schedule is shown below.

      Notice that the equipment is fully depreciated after 4 years.

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       _____     ___               _    _     ______  
  / ___//   / _ \\    ____    | || | ||  /_____// 
  \___ \\  | / \ ||  |    \\  | || | ||  `____ `  
  /    //  | \_/ ||  | [] ||  | \\_/ ||  /___//   
 /____//    \___//   |  __//   \____//   `__ `    
`-----`     `---`    |_|`-`     `---`    /_//     
                     `-`                 `-`
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  • 8. Construction Equipment Depreciation

    The owner of a construction company buys new equipment.

    Cost: $60,000

    Salvage value: $12,000

    Useful life: 8 years

    Make a double declining-balance depreciation schedule for the equipment. (See Example 3 and Example 4.)

    A spreadsheet is available to help you complete this exercise.

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     _    _     ______   ______      ___              
| || | ||  /_   _// |      \\   / _ \\    ____    
| || | ||   -| ||-  |  --  //  | / \ ||  |    \\  
| \\_/ ||   _| ||_  |  --  \\  | \_/ ||  | [] ||  
 \____//   /_____// |______//   \___//   |  __//  
  `---`    `-----`  `------`    `---`    |_|`-`   
                                         `-`
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  • 9. Construction Equipment Depreciation

    The owner of a construction company buys new equipment. A graph of the double declining-balance depreciation schedule for the equipment is shown. What is the value of the equipment after 3 years? (See Example 3 and Example 4.)

    • Worked-Out Solution

      From the graph, the value after 3 years appears to be about $145,000.

      You can check this by making a depreciation schedule.

      The annual rate of depreciation is

      A spreadsheet showing the depreciation schedule is shown below.

      From the schedule, you can see that the value after 3 years is $144,675.93.

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     _    _    _    _    _    _    _    _     _  _   
| || | || | || | || | || | || | || | ||  | \| || 
| || | || | || | || | || | || | || | ||  |  ' || 
| \\_/ || | \\_/ || | \\_/ || | \\_/ ||  | .  || 
 \____//   \____//   \____//   \____//   |_|\_|| 
  `---`     `---`     `---`     `---`    `-` -`
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  • 10. Construction Equipment Depreciation

    The owner of a construction company buys new equipment. A graph of the double declining-balance depreciation schedule for the equipment is shown. What is the value of the equipment after 5 years?

    (See Example 3 and Example 4.)

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    __    __     ___     ______    __   __    ______  
\ \\ / //   / _ \\  |      \\  \ \\/ //  /_   _// 
 \ \/ //   / //\ \\ |  --  //   \ ` //     | ||   
  \  //   |  ___  |||  --  \\    | ||     _| ||   
   \//    |_||  |_|||______//    |_||    /__//    
    `     `-`   `-` `------`     `-`'    `--`
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  • 11. Construction Equipment Depreciation

    The owner of a construction company buys new equipment. A graph of the double declining-balance depreciation schedule for the equipment is shown. How much depreciation did the company expense in year 8? (See Example 3 and Example 4.)

    data folder

    • Worked-Out Solution

      From the graph, it is difficult to tell how much was depreciated in Year 8. It appears to have been about $10,000.

      You can check this by making a depreciation schedule.

      The annual rate of depreciation is

      A spreadsheet showing the depreciation schedule is shown below.

      From the schedule, you can see that the amount that was depreciated in Year 8 was $11,628.40.

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      ______     ___      ______   __   __   __   _   
 /_   _//   / _ \\   /_   _//  \ \\/ // | || | || 
 `-| |,-   | / \ ||  `-| |,-    \ ` //  | '--' || 
   | ||    | \_/ ||    | ||      | ||   | .--. || 
   |_||     \___//     |_||      |_||   |_|| |_|| 
   `-`'     `---`      `-`'      `-`'   `-`  `-`
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  • 12. Construction Equipment Depreciation

    The owner of a construction company buys new equipment. A graph of the double declining-balance depreciation schedule for the equipment is shown. How much depreciation did the company expense in year 12? (See Example 3 and Example 4.)

    data folder

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      _____    __   __   ______      ___      _____   
 |__  //   \ \\/ // |      \\   / _ \\   |__  //  
   / //     \ ` //  |  --  //  / //\ \\    / //   
  / //__     | ||   |  --  \\ |  ___  ||  / //__  
 /_____||    |_||   |______// |_||  |_|| /_____|| 
 `-----`     `-`'   `------`  `-`   `-`  `-----`
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  • 13. Construction Equipment Depreciation

    The owner of a construction company buys 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 the company expense during the first 6 years when compared to straight-line depreciation? (See Example 3 and Example 4.)

    data folder

    • Worked-Out Solution

      The annual rate of depreciation is

      A spreadsheet showing the double declining-balance depreciation schedule is shown below. During the first 6 years, the company depreciated $166,275.51 of the purchase price of the equipment.

      Double Declining-Balance Depreciation Schedule

      A spreadsheet showing the straight-line depreciation schedule is shown below. During the first 6 years, the company depreciated about $110,000 of the purchase price of the equipment.

      Straight-Line Depreciation Schedule

      Note: When working with spreadsheets and depreciation, the entries for each year can vary by a few cents, depending on how the spreadsheet is programmed.

    Comments (4)

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     __   _    __   __   _    _    __   __            
| || | ||  \ \\/ // | |  | ||  \ \\/ //   ____    
| '--' ||   \ ` //  | |/\| ||   \ ` //   |    \\  
| .--. ||    | ||   |  /\  ||    | ||    | [] ||  
|_|| |_||    |_||   |_// \_||    |_||    |  __//  
`-`  `-`     `-`'   `-`   `-`    `-`'    |_|`-`   
                                         `-`
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    system user
    Ron Larson (author)1 decade ago |
    Hi Michelle, Thanks for taking the time to post a comment about the data in the spreadsheet. Please encourage your students to help us with any other improvements or corrections to the book. By the way, all four of my grandparents were homesteaders in North Dakota. They lived near a town called Sanish, which was flooded. Some of my cousins still farm the land there.
    0
    system user
    Cody (moderator)1 decade ago |
    Michelle,

    We have looked at the spreadsheet and found that there was an error in the data. The problem was fixed and the new spreadsheet was posted to the site.

    Thank you.
    0
    system user
    Cody (moderator)1 decade ago |
    Thank you for letting me know. I will take a look at the problem and let you know what I find.
    -Cody
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    system user
    Guest   1 decade ago |
    The spreadsheet attached to this problem seems to have a wrong formula in Column H - the depreciation. You may want to take a look at it.
    Michelle Swenson
    Math Teacher
    Ray High School, ND
    0
  • 14. Construction Equipment Depreciation

    The owner of a construction company buys new equipment. A graph of the double declining-balance depreciation schedule for the equipment is shown. Is there any year in which the value of the equipment using double declining-balance depreciation is greater than the value of the equipment using straight-line depreciation? (See Example 3 and Example 4.)

    data folder

    Comments (3)

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               _    _     ____      ______   __   _   
  ____    | || | ||  |  _ \\   /_   _// | || | || 
 |    \\  | || | ||  | |_| ||   -| ||-  | '--' || 
 | [] ||  | \\_/ ||  | .  //    _| ||_  | .--. || 
 |  __//   \____//   |_|\_\\   /_____// |_|| |_|| 
 |_|`-`     `---`    `-` --`   `-----`  `-`  `-`  
 `-`
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    Guest   11 months ago |
    KUTUN
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    system user
    Guest   2 years ago |
    this is ridiculous.
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    system user
    Guest   4 years ago |
    vimob
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