366 DEPRECIATION11-7 The Acme Chemical Company purchased $45,000 of
research equipment, which it believes will have zero
salvage value at the end of its 5-year life. Compute
the depreciation schedule for the equipment by each
of the following methods:.
(a)Straight line.
(b)Sum-of-years'-digits.
(c) Double declining balance.
(d)Modified accelerated cost recovery system.
11-8 Consider a $6500 piece of machinery, with a 5-year
depreciable life and an estimated $1200 salvage
value. The projected utilization of the machinery
when it was purchased, and its actual production to
date, are shown below.Year
1
2
3
4
5Projected
Production (tons)
3500
4000
4500
5000
5500Actual
Production (tons)
3000
5000
[Not
yet
known]Compute the machinery depreciation schedule by
each of the following methods:
(a)Straight line.
(b)Sum-of-years' -digits.
(c) Double declining balance.
(d)Unit of production (for first 2 years only).
(e) Modified accelerated cost recovery system.
11-9 A large profitable corporation purchased a small jet
plane for use by the firm's executives in January.
The plane cost $1.5 million and, for depreciationpur-
poses, is assumed to have a zero salvage value at the
end of 5 years. Compute the MACRS depreciation
schedule.
11-10 For an asset that fits into the MACRS "All prop-
erty not assigned to another class" designation, show
in a table the depreciation and book value over the
asset's lO-year life of use. The cost basis of the asset
is $10,000.11-11 A company that manufactures food and beverages
in the vending industry has purchased some han-
dling equipment that cost $75,000 and will be depre-
ciated using MACRS GDS. The class life of the
asset is 4 years, show in a table the yearly depre-
ciation amount and book value of the asset over its
depreciation life.
They are based on the same initial cost, useful life,
and salvage value. Identify each schedule as one of
the following. Straight-line depreciation.
.Sum-of-years' -digits depreciation.
.150% declining balance depreciation.
.Double declining balance depreciation.
. Unit-of-production depreciation.
.Modified accelerated cost recovery system..
11-13 The depreciation schedule for an asset, with a sal-
vage value of $90 at the end of the recovery period,
has been computed by several methods. Identifythe
depreciation method used for each schedule.
Year ABC D
1 $323.3 $212.0 $424.0 $194.0
2 258.7 339.2 254.4 194.0
3 194.0 203.5 152.6 194.0
4 129.3 122.1 91.6 194.0
5 64.7 122.1 47.4 194.0.(^6) ----- 61.1
970.0 lO60.0 970.0 970.0 970.0
j
iI
I
J
IE.
$lO7.0
216.0
324.0
216.0. 107.0
11-14 The depreciatib.n schedule for a microcomputer has
been arrived at by several methods. The estimated sal-
vage value of the equipment at the end of its 6-year
useful life is $600. Identify the resulting depreciation
schedules.
Year ABC D
1 $2114 $2000 $1600 $1233
2 1762 1500 2560 1233
3 14lO 1125 1536 1233
4 1057 844 922 1233
5 705 633 922 1233
6 352 475 460 1233
11-15 TELCO Corp has leased some industrial land near
its plant. It is building a small warehouse on the site
at a cost of $250,000. The building will be ready for
use January 1. The lease will expire 15 years after
the building is occupied. The warehouse will belong
at that time to the landowner, with the result thaIJ111-12 Consider five depreciationschedules:
Year A B C D E(^1) $45.00 $35.00 $29.00 $58.00 $43.50
2 36.00 20.00 46.40 34.80 30.45
3 27.00 30.00 27.84 20.88 21.32
4 18.00 30.00 16.70 12.53 14.92
5 9.00 20.00 16.70 7.52 10.44
6 8.36