The edu company purchased a new office computer and other depreciable computer hardware for $12,000. During the third year, the computer is declared obsolete and is donated to the local college. Assume that no salvage was initially declared and that the machine was expected to last 5 years.

Already done and answered: 1. Prepare a table with the depreciation schedules and book values for each method: a. Straight-line depreciation b. Double declining balance depreciation c. 100% bonus depreciation d. MACRS depreciation

Still requires answer: 2. Compute the PW of the depreciation charges for each method using an interest rate of 10%. Summarize all the information in a table and interpret the results.

Straight line method Depreciation= (cost-Salvage Value)/Useful life of asset =12000/5 =2400 Double declining balance depreciation =SLM rate of Depreciation *2 =2400/12000*100 *2 -40% A B C 12000 1 2 st 3 Life 4 Salvage 5 6 1. Straight Line 7 8 Year 9 10 3 12 5 14 15 2. Double Declining 16 17 Year 18 Opening Value Depreciation Accumulated Depreciation Closing Value 1 12000 2400 2400 9600 2 9600 2400 4800 7200 7200 2400 7200 4800 4800 2400 9600 2400 2 400 2400 12000|| 0 11 13 19 Opening Value Depreciation Accumulated Depreciation Closing Value 11 12000 4800 4800 7200 7200 28801 7680 4320 4320 1728 9408 2592 2592 1036.8 10444.8 1555.2 5 1555.2 622.08 11066.88 933.12 20 21 22 23 1 2 Cost 3 Life 4 Salvage 12000 15 lo 5 6 1. Straight Line 7 Opening Value 12000 =E9 Depreciation Accumulated Depreciation Closing Value 2400 =C9 I=B9-C9 2400 =C10+D9 =B10-C10 2400 =C11+D10 =B11-C11 2400 =C12+D11 =B12-C12 2400 =C13+D12 =B13-C13 =E10 =E11 =E12 8 Year 9 1 10 2 11 3 12 4 13 5 14 15 2. Double Declining 16 17 Year 18 1 19 2 20 3 21 4 22 5 =C18 Opening Value 12000 =E18 =E19 =E20 =E21 Depreciation Accumulated Depreciation Closing Value =B18*40% =B18-C18 =B19*40% =C19+D18 =B19-C19 =B20*40% =C20+D19 =B20-C20 =B21*40% =C21+D20 =B21-C21 =B22*40% =C22+D21 =B22-C22 23 24 25 3.100% bonus depreciation 26 Whole $12000 is allowed as deduction under section 179 in first year, 27 no depreciation in rest years 28 29 30 DB 31 4.MACRS depreciation Cum Rate Depreciati Book Year Basis ulati Method % on Value ve 1 12,000 20 2,400 2,400 9,600 2 12,000 32 3,8401 6,240 5,760 3 12,000 19.2 2,304 8,544 3,456 4 12,000 11.52 1,382 9,926 2,074 5 12,000 11.52 1,382 11,309 691 38 6 12,000 5.76 691 12,000 0 39 D 24 25 3.100% bonus depreciation 26 27 Whole $12000 is allowed as deduction under section 179 in first year, no depreciation in rest years 28 29 30 31 4.MACRS depreciation Year Basis Rate % Depreciation Cumulative Book Value Method 20 32 19.2 32 33 1 34 2 35 3 36 4 37 5 38 6 39 12000 12000 12000 12000 12000 12000 =B33*C33% =B34*C34% =B35*C35% =B36*C36% =B37*C37% =B38*C38% =D33 =E33+D34 =E34+D35 85+236 =E36+D37 =E37+D38 =B33-E33 =B34-E34 =B35-E35 =B36-E36 =B37-E37 =B38-E38 11.52 (11.52 5.76