Question

A surface mount PCB placement/soldering line is to be installed for $1,300,000. It will have a salvage value of $150,000 after 5 years. Determine the depreciation deduction and the resulting unrecovered investment during each year of the asset’s life.

Click here to access the MACRS-GDS Table Calculator

Part a

Determine the depreciation deduction and the resulting unrecovered investment during each year of the asset’s life using declining balance depreciation using double declining balance depreciation.

EOY		Depreciation		Balance
0		enter a dollar amount		enter a dollar amount
1		enter a dollar amount		enter a dollar amount
2		enter a dollar amount		enter a dollar amount
3		enter a dollar amount		enter a dollar amount
4		enter a dollar amount		enter a dollar amount
5		enter a dollar amount		enter a dollar amount
Sum depreciation		enter a total amount

Round entry to 0 decimal places. The tolerance is ±10.

Answer 1

A surface mount PCB placement/soldering line is to be installed for $1,300,000. It will have a salvage value of $150,000 after 5 years. Determine the depreciation deduction and the resulting unrecovered investment during each year of the asset’s life.

.

Part a

Determine the depreciation deduction and the resulting unrecovered investment during each year of the asset’s life using declining balance depreciation using double declining balance depreciation.

.

EOY	Depreciation	Balance
0	0	1300000
1	520000	780000
2	312000	468000
3	187200	280800
4	112320	168480
5	18480	150000
	1150000

.

Cost = $1300000

Salvage value = 150000

Useful life = 5 years

Method = double decline method

double decline percentage = straight line % * 2

straight line % = 100 / 5 = 20%

double decline percentage = 20 * 2 = 40%

1^st  year end = 1300000 * 40% = 520000

2^nd year = 780000 * 40% = 312000

3^rd year = 468000 * 40% = 187200

4^th year = 280800 * 40% = 112320

5^th year = 168480 - 150000 = 18480

.

Double decline balance method:

Under this method we used a depreciation rate that is two time the percent that would recognize under straight line dep. Method.

.

Salvage value is not taken in to account when calculating the annual dep. Charge. However near the end of the assets useful life, we need to pay the attention on the salvage value to make certain that we don’t depreciate assets below its salvage value.