Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Chapter 8 Depreciation
Book Depreciation Methods
Economic Depreciation
8.5 economic depreciation = $5,000 $2,300 = $2,700
Cost Basis
8.6 Cost basis for flexible manufacturing cells:
Cost Basis
8.8 Trade-in allowance:
Comments: If the old drill was sold on the market (instead of trade-in), there
would be no unrecognized loss. In that situation, the cost basis for the new drill
will be just $95,000.
Comments: If the old truck was sold on the market (instead of trade-in), there
would be no unrecognized gains. In that situation, the cost basis for the new
truck will be just $35,000.
*
8.11
5(5 1)
8.12 (a) SOYD 15
2
(c) The depreciation amounts in the first four years are (5/15), (4/15), (3/15),
and (2/15) respectively, for a total of (14/15). Therefore the total depreciation
for these four years is $10,000*(14/15) = $9,333. Therefore, B4 = $12,000-
$9,333 = $2,667.
Units-of-Production Method
D = ($0.32)(55,000) = $17,600
MACRS Depreciation
*
8.16
200% DB SL MACRS
n Bn1 Dn life Dn Dn
1 $20,000 $3,333 $3,333
2 $16,667 $5,556 5.5 $3,030 $5,556
3 $11,111 $3,704 4.5 $2,469 $3,704
4 $7,407 $2,649 3.5 $2,116 $2,649
5 $4,938 $1,646 2.5 $1,975 $1,975
6 $3,292 $549 1.5 $1,975 $1,975
7 0.5 $988
5 5,948 13,878
8.18 This non-systems software belongs in Class 12 (see Table 8.1) with d = 100%.
It is subject to the 50% rule since it is NOT exempt (see Section 8.4.4).
Year CCA UCC
0 $10,000
1 $5,000 5,000
2 5,000 0
3 0 0
4 0 0
Cost Basis
8.19
Total property value with the warehouse:
Land Building
Original cost $65,000 $35,000
Adjustments to basis 35,000
Add: New warehouse 50,000
Demolition expense 5,000
Subtract: Building loss (35,000)
Adjusted cost basis $100,000 $55,000
SL DB SOYD
n Dn Bn Dn Bn Dn Bn
1 $18,000 $82,000 $20,000 $80,000 $30,000 $70,000
2 18,000 64,000 16,000 64,000 24,000 46,000
3 18,000 46,000 12,800 51,200 18,000 28,000
4 18,000 28,000 10,240 40,960 12,000 16,000
5 18,000 10,000 8,192 32,768 6,000 10,000
*
8.21
n D(DB) D(SL)
0 $30,000
1 4,286* $3,143 25,714
2 3,673* 2,952 22,041
3 3,149* 2,808 18,892
4 2,699 2,723* 16,169
5 2,310 2,723* 13,446
6 1,921 2,723* 10,723
7 1,532 2,723* 8,000
*amount claimed in year n
n Dn Bn
1 $26,667 $53,333
2 17,778 35,556
3 11,852 23,704
4 1, 704 22,000
5 0 22,000
6 0 22,000
Comments: If the regular DDB deduction is taken during the fourth year, B4
would be less than the salvage value. Therefore, it is necessary to adjust D4.
The number in the box represents the adjusted value.
*
8.23
n SL DDB SOYD
1 $3,400 $8,000 $5,667
2 3,400 4,800 4,533
3 3,400 2,880 3,400
4 3,400 1,320 2,267
5 3,400 0 1,133
(b) D3 = $6,713
(c) D2 = $7,051
Units-of-Production Method
8.25
Truck A:
25, 000
D ($50, 000 $5, 000) $5, 625
200, 000
Truck :
12, 000
D ($25, 000 $2,500) $2, 250
120, 000
Truck C:
15, 000
D ($18,500 $1,500) $2,550
100, 000
Truck D:
20, 000
D ($35, 600 $3,500) $3, 210
200, 000
n D(book) CCA
1 $3,375 $4,800
2 3,375 8,160
3 3,375 5,712
4 3,375 3,998
5 3,375 2,799
6 3,375 1,959
7 3,375 1,371
8 3,375 960
(a) CCA1 = (0.04/2) 120,000 = $2,400 (Note: The land is not depreciable.)
8.28 The spindle machine became available for use on the second taxation year
after the date the property was acquired, which is 2008. Since the spindle
machine became available for use more than 358 days after acquisition, it is
exempt from the 50% rule. Class 43: d = 30%
n CCAn UCCn
2006 $34,000
2008 $10,200 23,800
2009 7,140 16,660
2010 4,998 11,662
2011 3,499 8,163
2012 2,449 5,714
8.30
Book depreciation:
Asset Type
Year Lathe Truck Building Photocopier
1 $7,500 $2,530 $14,000 $13,333
2 6,250 2,875 14,000 10,666
(a) Tax depreciation: All four assets are subject to 50% rule
Asset Type
Year Lathe Truck Building Photocopier
1 $6,750 $3,750 $16,000 $4,000
2 11,475 6,375 31,360 7,200
n Dn n Dn
1 $7,500 7 $2,512
2 6,250 8 2,093
3 5,208 9 1,866
4 4,340 10 1,866
5 3,617 11 1,866
6 3,014 12 1,866
*
8.31
Type of Asset I II III IV
Dep. methods SL DDB SOYD UP
End of year 7 4 3 3
Initial cost ($) 10,000 18,000 90, 000 30,000
Salvage value ($) 2,000 2,000 7,000 0
Book value ($) 3,000 2,320 23, 600 15, 000
Depreciable life 8 years 5 years 5 years 90,000 km
Dep. amount ($) 1, 000 1,555 16,600 5, 000
Accum. Dep. (S) 7, 000 15,680 66,400 15, 000
8.32
Given: = $147,000, = 10 years, S = $27,000, units produced = 250,000,
working hours = 30,000 hrs
(a) Straight-Line
23, 450
D2009 ($147, 000 $27, 000) $11, 256
250, 000
2, 450
D2009 ($120, 000) $9,800
30, 000
(d) Sum-Of-the-Years-Digits
10
D2009 ($147, 000 $27, 000) $21,818
55
1
D2009 ($147, 000) $14, 700
10
2
D2009 ($147, 000) $29, 400
10
8.33 All of these assets are subject to the 50% rule. CCA may be claimed starting in
the year when each asset becomes available for use.
8.35
Depreciation Method
A SOYD
DDB
C CCA
D DDB with conversion to SL
MACRS Depreciation
8.36 Let P denote the cost basis for the equipment.
B3 P ( D1 D2 D3 ) P
P (0.1428 0.2449 0.1749) P
P 0.5626 P
0.4374($145, 000)
$63, 423
Revisions to Depreciable Property
8.37 Referring to Example 8.11, we must calculate the prorated portion, which is the
lesser of:
or (b) the number, N, of 12-month periods from the start of the year when the
improvement was made to the end of the original lease = 7 (Note: Lease
renewal is not applicable.)
The lesser of these is $3,143, with only half claimable in the first year. The
allowable CCA for the first three years after the leasehold improvement:
8.38
(a) D = ($1,200,000 $400,000)/ 25 = $32,000/year
= 37.5 years
8.39
(a) Book depreciation amount for 2011:
YEAR 2
8 $6,300 $0 $0 $6,300 $0 $6,300 20% $1,260 $5,040
10 $11,050 $0 $0 $11,050 $0 $11,050 30% $3,315 $7,735
12 $1,600 $1,000 $0 $2,600 $500 $2,100 100% $2,100 $500
50 $2,538 $4,000 $0 $6,538 $2,000 $4,538 55% $2,496 $4,042
TOTAL = $9,171
YEAR 3
8 $5,040 $2,500 $1,000 $6,540 $750 $5,790 20% $1,158 $5,382
10 $7,735 $20,000 $6,000 $21,735 $7,000 $14,735 30% $4,421 $17,315
12 $500 $0 $0 $500 $0 $500 100% $500 $0
50 $4,042 $0 $0 $4,042 $0 $4,042 55% $2,223 $1,819
TOTAL = $8,302
YEAR 4
8 $5,382 $0 $0 $5,382 $0 $5,382 20% $1,076 $4,306
10 $17,315 $0 $0 $17,315 $0 $17,315 30% $5,194 $12,120
12 $0 $0 $0 $0 $0 $0 100% $0 $0
50 $1,819 $2,000 $500 $3,319 $750 $2,569 55% $1,413 $1,906
TOTAL = $7,684
ST 8.2
(a) Book depreciation schedule: SL depreciation rate = ($79,500 $4,500)/12
= $6,250 each year (including 2008)
n CCAn UCCn
2005 $11,925 $67,575
2006 20,273 47,303
2007 14,191 33,112
2008 9,934 23,178
Year Dn Bn
2004 $6,100 $58,900
2005 $6,100 $52,800
ST 8.4
(a) Book depreciation methods:
Straight-line method:
Cumulative
n Dn Bn Dn
1 $12,000 $53,000 $12,000
2 12,000 41,000 24,000
3 12,000 29,000 36,000
4 12,000 17,000 48,000
5 12,000 5,000 60,000
DDB method:
Cumulative
n Dn Bn Dn
1 $26,000 $39,000 $26,000
2 15,600 23,400 41,600
3 9,360 14,040 50,960
4 5,616 8,424 56,576
5 3,424 5,000 60,000
SOYD method:
Cumulative
n Dn Bn Dn
1 $20,000 $45,000 $20,000
2 16,000 29,000 36,000
3 12,000 17,000 48,000
4 8,000 9,000 56,000
5 4,000 5,000 60,000
n CCAn UCCn
0 $65,000
1 $9,750 55,250
2 16,575 38,675
3 11,603 27,073
4 8,122 18,951
5 5,685 13,266
(c) Since we don't have the market value after three years, we may assume
that the salvage value equals the trade-in value.