Question

Mining process equipment used as auxiliary equipment in the processing of copper concentrates has an installed cost of $200 000 with an estimated five year life and estimated salvage value of $15 000. Calculate the depreciation for a five year life using a) straight line method and b) the 200% DB method.

Answer 1

(a)

SL annual depreciation = (Cost - Salvage value) / Life = (200,000 - 15,000) / 5 = 185,000 / 5 = $37,000

Depreciation schedule as follows.

SLM
Year	Beginning-of-year Book Value ($)	Annual Depreciation ($)	Accumulated Depreciation ($)	End-of-Year Book Value ($)
1	2,00,000	37,000	37,000	1,63,000
2	1,63,000	37,000	74,000	1,26,000
3	1,26,000	37,000	1,11,000	89,000
4	89,000	37,000	1,48,000	52,000
5	52,000	37,000	1,85,000	15,000

(b)

SL depreciation rate = 1/Life = 1/5 = 0.2

200% DB depreciation rate = 2 x SL rate = 0.4

Depreciation schedule as follows. This method ignores salvage value.

DDB
Year	Beginning-of-year Book Value ($)	Depreciation Rate	Annual Depreciation ($)	Cumulative Depreciation ($)	End-of-Year Book Value ($)
1	2,00,000	0.4	80,000	80,000	1,20,000
2	1,20,000	0.4	48,000	1,28,000	72,000
3	72,000	0.4	28,800	1,56,800	43,200
4	43,200	0.4	17,280	1,74,080	25,920
5	25,920	0.4	10,368	1,84,448	15,552