1) Ben and Jerry's Inc. is considering the purchase of a secondhand milkshake equipment at a cost of $10,500, with an estimated salvage value of $500 and a projected useful life of 4 years. Determine the straight line (SL), sum-of-years'-digits (SOYD) and double declining balance (DDB) depreciation schedules.

2) A large profitable corporation (Google) bought a small jet plane for use by the firm's executives in January. The plane's initial cost was $1.5 million and for depreciation purposes the company assumes the salvage value will be $400,000. Calculate the depreciation schedule using a 5-year MACRS property life.

3) De Beers Jewelry purchased a crystal extraction machine for $50,000 that has an estimated salvage value of $10,000 at the end of its 8-year useful life. Compute the depreciation schedule using:

a) Straight-line (SL)

b) Double declining balance depreciation

c) MACRS depreciation

4) A small used delivery van can be purchased for $20,000. At the end of its useful like (8 years), the van can be sold for $3,000. Determine the present value (present worth) of the depreciation schedule, assuming a 15% interest rate, using:

a) Straight-line (SL)

b) Double declining balance depreciation

c) MACRS depreciation (Assume a 5-yr MACRS property class)

5) Assume that an equipment costing $900,000 has been purchased for use in a sand and gravel pit. The pit will operate for 5 years, while a nearby construction is in progress and will shut down when this construction finalizes. The pit will be shut down and sold for $70,000. Compute the unit of production (UOP) depreciation schedule if that construction schedules for 40,000 m³ of sand and gravel using the following:

Year Required Gravel and Sand (m³)

1 4,000

2 8,000

3 16,000

4 8,000

5 4,000

Class DepreciationPeriod Description

3-year property 3 years

Tractor units for over-the-road use, race horses over 2 years old when placed in service, any other horse over 12 years old when placed in service, qualified rent-to-own property

5-year property 5 years

Automobiles, taxis, buses, trucks, computers and peripheral equipment, office equipment, any property used in research and experimentation, breeding cattle and dairy cattle, appliances & etc. used in residential rental real estate activity, certain green energy property.

7-year property 7 years

Office furniture and fixtures, agricultural machinery and equipment, any property not designated as being in another class, natural gas gathering lines

10-year property 10 years

Vessels, barges, tugs, single-purpose agricultural or horticultural structures, trees/vines bearing fruits or nuts, qualified small electric meter and smart electric grid systems

15-year property 15 years

Certain land improvements (such as shrubbery, fences, roads, sidewalks and bridges), retail motor fuels outlets, municipal wastewater treatment plants, clearing and grading land improvements for gas utility property, electric transmission property, natural gas distribution lines

20-year property 20 years

Farm buildings (other than those noted under 10-year property), municipal sewers not categorized as 25-year property, the initial clearing and grading of land for electric utility transmission and distribution plants

25-year property 25 years

Property that is an integral part of the water distribution facilities, municipal sewers

Residential rental property 27.5 years

Any building or structure where 80% or more of its gross rental income is from dwelling units

Nonresidential real property 39 years

An office building, store, or warehouse that is not residential property or has a class life of less than 27.5 years

MACRS GDS percentage rate:

Recovery Year 3-yearclass 5-yearclass 7-yearclass 10-year 15-year20ye

1 33.33 20.00 14.29 10.00 5.00 3.750

2 44.45 32.00 24.49 18.00 9.50 7.219

3 *14.81 19.20 17.49 14.40 8.55 6.677

4 7.41 *11.52 12.49 11.52 7.70 6.177

5 11.52 *8.93 9.22 6.93 5.713

6 5.76 8.92 7.37 6.23 5.285

7 8.93 *6.55 *5.90 4.888

8 4.46 6.55 5.90 4.522

9 6.56 5.91 *4.462

10 6.55 5.90 4.461

11 3.28 5.91 4.462

12-15 5.90 4.461

16 2.95 4.461

17-20 4.462

21 2.231