The Mathematics of Money

Copyright © 2008, The McGraw-Hill Companies, Inc.

C. Straight-Line Depreciation

6. A new refrigerator for a restaurant costs $6,000. The useful life is 9 years, and the salvage value is $1,500.

a. Determine the annual depreciation amount using straight-line depreciation.

b. Determine the depreciated value of the refrigerator after 4 years of use.

7. Zarofi re Systems bought new fi ling cabinets for the home offi ce. The total cost was $47,500. The useful life is 8 years,
   and the salvage value is $7,500. Find the amount of straight-line depreciation per year, and determine the depreciated
   value of these cabinets after 5 years of use.


8. A gas station owner purchased new gas pumps for $192,300. The useful life is 6 years, and the salvage value is
   zero. Find the per-year straight-line depreciation amount, and use it to determine the depreciated value after 4 years
   of use.


9. Suppose that a retail store owner buys fi xtures for $20,000. These fi xtures have an 8-year useful life and no salvage
   value.

a. Determine the per-year straight-line depreciation amount.

b. Suppose these fi xtures are put into use 7 months before the end of 2008. How much depreciation should be taken

for them in 2008?

c. Find the depreciated value of the fi xtures as of the end of 2011.

10. Suppose that Bradenford State College bought new computers for a student lab for $64,500. The useful life is 5 years
    and the computers have no salvage value.
    a. Determine the per-year straight-line depreciation amount.
    b. Suppose the computers were put into use 4 months before the end of 2007. How much depreciation should the
    college take for these computers for 2007?
    c. Determine the depreciation amount for the remainder of the computers’ useful life by completing the table
    below:

Year

Depreciation

Amount

Depreciated Value at

End of Year

2007

2008

2009

2010

2011

2012

D. MACRS

11. Bradenford National Corporation bought new computers for its offi ces. The company uses MACRS depreciation. The
    total cost of the computers was $64,500. (The MACRS table for 5-year assets is given in the text of this section.)

a. Determine the MACRS depreciation for these computers for the fi rst year.

b. Suppose the computers were put into use 4 months before the end of 2007. How much depreciation will the

company take for these computers for 2007?

Exercises 8.4 371