Download ANNUITY LESSON in engineering economics and more Summaries Engineering Economy in PDF only on Docsity! ESSON-5" DEPRECIATION” ENGR. JACOB G. BEGAS, CE DEPRECIATION = Depreciation ties the cost of using a tangible asset with the benefit gained over its useful life. =There are many types of depreciation, including straight- line and various forms of accelerated depreciation. cumulated depreciation refers to the sum of all epreciation recorded on an asset to a specific date. The carrying value of an asset on the balance sheet is its historical cost minus all accumulated depreciation. =The carrying value of an asset after all depreciation has been taken is referred to as its salvage value. Straight Line Method F.C —S.V. n F.C —S.V. T.D.=———— (x) B.V.= F.C —T.D. A. D.= PROBLEM NO. 1 A unit of welding machine cost 45,000 with an estimated life of 5 years. Its salvage valve is 2,500 find its depreciation rate of straight line method. Assuming that will eposit the money to a bank giving 8.5%. SOLUTION: | F.C.= 45,000 ~ $.V.=2,500 A.D.= FCT SV. n=5 n 45,000 — 2,500 5 A. D.= 8,500.00 A. D.= Sinking Fund Method msinking fund method is a technique for depreciating an asset while generating enough money fo replace it at the nd of its useful life. As depreciation charges are incurred to reflect the asset's falling value, a matching amount of cash is invested. These funds sit in a sinking fund account and generate interest. Sinking Fund Method _(F.C-S.V.)(G) AD = Tp A.D.[(1+i)* -1 Pp, — 12. + oe l B.V.= F.C —T.D. PROBLEM NO. 1 A Broadcasting corporation purchased equipment for 53,000 and paid 1,500 for freight and delivery charges to the job site. The equipment has a normal life of 10 with a trade-in value of 5,000 against the purchase of a new equipment at the end of the life and its interest rate of 6%. Determine the annual epreciation cost by sinking fund method. SOLUTION: F.C.= 8M ap a Fe SV IO _ (8M — 200K) (5%) S.V.=200K = Gypee1) P= a smps—1 n=25 i=5% X=AT THE END 10 YEARS A. D.= 163,200 _ 1632000 [(1 + 5%)"° — 1] 7 5% T. D.= 2,055,600 B.V.= F.C —T.D. B.V.= F.C —T.D. B.V.= 5,944, 400.00 BE CONTINUED...................... GODBLESS! ‘UPCOMING MARATHON QUIZ
