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Depreciation and Appreciation of Long-Term Assets

1) In the three depreciation methods you have learned, one is unique:
- What is the name of this depreciation method?
- What do you do with the Salvage Value at the beginning?
- What do you with the Salvage Value at the end?

2) What are the two items on the Assets side of the Balance Sheet under "Plant and Equipment" that CANNOT be depreciated or appreciated by a company?

1) Lucianno's Pizza purchased a car to be used in delivering pizzas. The car cost $14,000 (Cost). It will be used for 5 years (Number of years). After 5 years the residual value (Salvage Value) will be about $2,000. In these 5 years, Lucianno's estimates the car will be driven 80,000 miles (Units). Clearly show the depreciation for each year.

A) Calculate the depreciation for all 5 years using the "Straight-line depreciation method"

B) Calculate the depreciation for all 5 years using the "Units-of-production depreciation method"

The car was driven as follows:
Year 1: 10,000 miles
Year 2: 15,000 miles
Year 3: 18,000 miles
Year 4: 20,000 miles
Year 5: 17,000 miles

Hint: The car was driven a total of 80,000 miles. Miles are the unit.

2) ABC Marketing recently purchased a machine that coast $80,000 (Cost). The machine is expected to last 4 years and has a residual value of $6,000. Calculate the depreciation expense to be recorded each year using the "Declining - Balance depreciation method".

3) Exercise 6.8A (Again use the same presentation as shown on Exhibit 6-4): Depreciation Calculation Method. Kleener Co. acquired a new delivery truck at the beginning of its current fiscal year. The truck cost $26,000 and has an estimated useful life of 4 years and an estimated salvage value of $4,000.
Calculate depreciation expense for each year of the truck's life using:
1. Straight -line depreciation method.
2. Double-declining-balance depreciation method.

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Step by step Depreciation techniques. Consideration of the appreciation of asset value

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