Q$2$: At the end of this year, a farm tractor, a depreciable asset, will cost $$1,750,000$ to buy. It is also estimated to have a residual$/$scrap$/$salvage value of $$250,000$ at the completion of its depreciable life of five years.

A$)$ By drawing annual depreciation schedules, compute the depreciation allowances, $D(n),$ and the associated the end$-$of$-$year book values, B$($n$),$ through using the following depreciation methods:

i$)$ The straight$-$line $($SL$)$ method.

ii$)$ The double declining balance $($DDB$)$ method.

B$)$ From the depreciation schedules computed in $($A$)$ above:

i$)$ Using straight$-$line depreciation, how much can be depreciated annually over the $5-$year life of the tractor? What is the book value of the asset at year $3?$

ii$)$ Using double$-$declining balance, what is the allowable depreciation for year $3$ of the asset? What is the book value of the asset this year?

C$)$ For DDB method, if switching to SL method is allowed when is the optimal time to switch?