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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

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

________________________________________________________________

  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

  1. 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

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