Question
In: Finance
The XYZ Block company purchased a new office computer and other depreciable computer hardware for $12,000....
The XYZ Block 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 community college. Assume that no salvage was initially declared and that the machine was expected to last 5 years.
Required:
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.
Important: USE Excel ONLY to do this work (tables, graphs, PW, etc.) and demonstrate the use of financial functions to compute the depreciation schedules a, b, d.
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.
Please help me. USE ONLY EXCEL AND ADD THE TABLES OF EXCEL PLEASE. ITS VERY IMPORTANT TO MY CLASS it is well done and correct!
Solutions
Expert Solution
| A- | |||||
| cost of computer | 12000 | ||||
| life of computer | 5 years | ||||
| Annual depreciation Using straight line method = cost of computer/life of computer | 12000/5 | 2400 | |||
| Straight line method | |||||
| Year | beginning Book value | Annual depreciation | Year end book value | ||
| 1 | 12000 | 2400 | 9600 | ||
| 2 | 9600 | 2400 | 7200 | ||
| 3 | 7200 | 2400 | 4800 | ||
| B- | |||||
| Straight line rate of depreciation =1/life of computer | 1/5 | 0.2 | |||
| double declining rate | .2*2 | 40% | |||
| Double declining method | |||||
| Year | beginning of year value of computer | double declining rate | annual depreciation | year end balance = cost of equipment-annual depreciation | |
| 1 | 12000 | 40% | 4800 | 7200 | |
| 2 | 7200 | 40% | 2880 | 4320 | |
| 3 | 4320 | 40% | 1728 | 2592 | |
| C- | 100% bonus depreciation | ||||
| Year | Beginning balance | Annual depreciation | Year end book value = beginning balance-annual depreication | ||
| 0 | 12000 | 12000 | 0 | ||
| 1 | 0 | 0 | 0 | ||
| 2 | 0 | 0 | 0 | ||
| 3 | 0 | 0 | 0 | ||
| MACRS depreciation | |||||
| D- | Beginning year value | cost of computer | MACRS rate | annual depreciation = cost of computer*MACRS rate | year end balance = beginning balance-annual depreciation |
| 1 | 12000 | 12000 | 20% | 2400 | 9600 |
| 2 | 9600 | 12000 | 32% | 3840 | 5760 |
| 3 | 5760 | 12000 | 19.20% | 2304 | 3456 |
| B- | Straight Line method | ||||
| Year | Annual depreciation expense | present value factor at 10% =1/(1+r)^n r =110% | present value of annual depreciation expense = annual depreciation*present value factor | ||
| 1 | 2400 | 0.909090909 | 2181.818182 | ||
| 2 | 2400 | 0.826446281 | 1983.471074 | ||
| 3 | 2400 | 0.751314801 | 1803.155522 | ||
| total of present value of annual depreciation expense | 5968.44 | ||||
| Double declining method | |||||
| Year | Annual depreciation expense | present value factor at 10% =1/(1+r)^n r =110% | present value of annual depreciation expense = annual depreciation*present value factor | ||
| 1 | 4800 | 0.909090909 | 4363.636364 | ||
| 2 | 2880 | 0.826446281 | 2380.165289 | ||
| 3 | 1728 | 0.751314801 | 1298.271976 | ||
| total of present value of annual depreciation expense | 8042.07 | ||||
| 100% bonus depreciation method | |||||
| Year | Annual depreciation expense | present value factor at 10% =1/(1+r)^n r =110% | present value of annual depreciation expense = annual depreciation*present value factor | ||
| 0 | 12000 | 1 | 12000 | ||
| 1 | 0 | 0.909090909 | 0 | ||
| 2 | 0 | 0.826446281 | 0 |
jeff jeffy answered 2 years ago