Economics question about deprection . Your account has sent you the table below

Question

Economics question about deprection .

Your account has sent you the table below showing annual depreciation charges for an asset by 5 methods.unfortunately his fax machine left out the cost salvage value of the asset (which apparently has a five year life period) and the coloumn heading year Assume the following:capital cost means salvage is $ 10,000 perform the following Determine which of the following coloumn is straight line, declining balance. and/or units of production. note also that a method may have been used more than once. please indicate all possible depreciation methods for each Estimate the capital cost and salvage value

Explanation / Answer

colum B is difinitely straight line depreciation method

from column F, which is double declining method of depreciation,

no of year, n = 5

depreciation per year = (100/n)*2 = 40% of the remaining book value

so, for year 1 if depreciation is $6000

book value = 6000/.4 = $15000

remaining book value = 15000-6000 =$9000

for year 2

depreciation = 9000*.4 = $3600 (which is given)

remaining book value = 9000-3600 = $5400

but since,

book value-salvage value = 5000

so final year depreciation = $400

so, from column F

Book value = $15000

Salvage value = $5000

Similarly Column A is 150% declining method of depreciation

depreciation per year = 100%/5)*(150%) = 30% of the book value

depreciation in year 1 = 15000*30% = $4500

depreciation in year 2 = (15000-4500)*30% = $3150

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