EGN3613 Module 10 Calculation Example
Engineering Economics Calculation Examples with
Depreciation methods - calculation examples with
Cost basis for depreciation
Double declining depreciation
(Solution Set #10)
Q1. Lanier Corporation purchased an automatic hole-punching machine priced at $62,500. The vendor’s invoice included a sales tax of $3,263. Lanier also paid the inbound transportation charges of $725 on the new machine, as well as the labor cost of $2,150 to install the machine in the factory. In addition, Lanier had to prepare the site at a cost of $3,500 before installation. Determine the cost basis for the new machine for depreciation purposes.
Q2. Continuing from question 1, Suppose Lanier purchased the hole-punching press by trading in a similar machine and paying cash for the remainder. The trade-in allowance is $5,000, and the book value of the hole-punching machine that was traded in is $4,000. Determine the cost basis for this hole-punching press.
Q3. Consider the following data on an automobile:
Cost Basis of the asset, I = $10,000
Useful Life, N = 5 years
Estimated salvage value, S = $2,000
Use the straight-line depreciation method to compute the annual depreciation allowances and the resulting book values.
Q4. Consider the following accounting information for a computer system:
Cost Basis of the asset, I = $10,000
Useful Life, N = 5 years
Estimated salvage value, S = $778
Use the double-declining-depreciation method to compute the annual depreciation allowances and the resulting book values
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