In these two problems, assume all machinery was purchased at the first of the year.

Machine Cost Salvage Value Useful Life

1) Tractor A 50,000 20,000 5

2) Tractor B 60,000 0 5

3) Combine 84,000 0 7

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1. Assume you own the machinery above. Calculate annual depreciation using the straight-line method.

(10 points)

	Tractor A	Tractor B	Combine
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7

2. Now calculate annual depreciation on the same equipment using double declining balance. Be careful not to exceed the salvage value. If the salvage value is zero, switch to straight-line in the year when straight-line yields higher depreciation. (Use the remaining value as the starting point when you change.)

(10 points)

	Tractor A	Tractor B	Combine
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7