Question

Fido Rescue is building a new kennel and investing in new equipment. The kennel will cost $300,000 to build, and will last 20 years. It is expected that at the end of this period, it will be torn down and will have no remaining value. The associated equipment is expected to cost $50,000 and will have a useful life for the agency of 10 years. At that point it can be sold for 10 percent of its original value (for now, ignore discounting). Please show the mathematics used to calculate the answer to 10. Write out all steps and arithmetic formulas in detail.

Answer 1

the depriciation on kennel will be calculated by dividing the number of years the kennel is useful why is it so because we are paying the 300000 for kennel but that amount will give us benefit till the 20 years so the such soending of 300000 is distributed till 20 years.

amount of depricoation on kennel = (Initial cost-salvage value)/No of useful years = 3000000/20 = $15000

so will take $15000 as depriciation each till year 20.

for the equipment cost the $50000 and it will be sold for the 10% of cost that means at the $5000 so we will face total write off of $45000 but such equipment will be last for 10 years so we will distribute this write up cost till year 10. that write up cost is called the depriciation :-

depriciation = (initial cost -salvage value)/ no of yeras = (50000-5000)/10 = $4500

so we will take 4500 as the depriciation on the equipment till the year 10.

so till the 10 years we will have total depriciation of $15000+$4500 = $19500

for 11 to 20 years we will have the total depriciation of the $15000 only