Professional Documents
Culture Documents
Newnansm 11
Newnansm 11
11-1
Year
1
2
3
4
5
6
Sum
SOYD
$2,400
$2,000
$1,600
$1,200
$800
$400
$8,400
DDB
$3,333
$2,222
$1,482
$988
$375*
$0
$8,400
*Computed $658 must be reduced to $375 to avoid depreciating the asset below its salvage
value.
11-2
DDB Schedule is:
Year
n
1
2
3
4
5
6
DDB
Depreciation
= $333,333
= $222,222
= $148,148
= $98,766
= $65,844
= $56,687
= $61,266
= $56,687
= $264,286
= $220,238
= $176,190
= $132,143
= $ 88,095
= $ 44,048
As an example:
If i% is=
0%
2%
10%
25%
PW of DDB is=
$925,000
$881,211
$738,331
$561,631
PW of SOYD is=
$925,000
$877,801
$724,468
$537,130
Preferred is
Equal, same
DDB
DDB
DDB
Thus, if MARR% is > 0%, DDB is best. One can also see this by inspection of the
depreciation schedules above.
11-3
DDB Depreciation
Year
1
(2/5) ($16,000 - $0)
2
(2/5) ($16,000 - $6,400)
3
(2/5) ($16,000 $10,240)
4
(2/5) ($16,000 $13,926)
Sum
DDB Depreciation
= $6,400
= $3,840
= $2,304
= $830
$14,756
Beginning
of Yr
Book
Value
$9,600
$5,760
$3,456
$2,074
Remaining
Life
4 yrs
3 yrs
2 yrs
1 yr
SL = (Book
Salvage)/Remaining
Life
$2,400
$1,920
$1,728
$2,074
Decision
Do not switch
Do not switch
Switch to SL
11-4
P=$12,000
S=$3,500
N=4
=($12,000-$3,500) / 4
SOYD
$3,400
$2,550
3 Year:
$1,700
4th Year:
$850
2nd Year:
rd
DDB
= $6,000
nd
= $3,000
rd
= $1,500
th
= $750
2 Year:
3 Year:
4 Year:
(d) CCA
Special handling equipment classifies as a Class 43 asset with a CCA rate of 30%
Year
1
2
3
4
UCC at Start of
Year
$
12,000
$
10,200
$
7,140
$
4,998
Depreciation
Charge for year UCC at end of
CCA Rate
t = dt
year t
15% $
1,800 $
10,200
30% $
3,060 $
7,140
30% $
2,142 $
4,998
30% $
1,499 $
3,499
11-5
The computations for the first three methods (SL, DB, SOYD) are similar to Problem 11-4.
(d) Furniture: Class 8 (CCA rate=20%)
Year
Class
No.
Undep.
capital
cost at
beginning
of year
Cost of
acq.
during
the
year
Proceeds
of
disp.
during
the
year
50,000.0
0
45,000.00
36,000.00
28,800.00
23,040.00
18,432.00
14,745.60
8
9
10
8
8
8
11,796.48
9,437.18
7,549.75
0
0
0
0
0
0
Undep.
capital
cost
50,000.0
0
45,000.0
0
36,000.0
0
28,800.0
0
23,040.0
0
18,432.0
0
14,745.6
0
11,796.4
8
9,437.18
7,549.75
50% rule
25,000.0
0
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Reduced
undep.
capital
cost
CCA
rate
%
Capital
cost
allowance
20
5,000.00
20
9,000.00
20
7,200.00
20
5,760.00
20
4,608.00
20
3,686.40
20
2,949.12
45,000.0
0
36,000.0
0
28,800.0
0
23,040.0
0
18,432.0
0
14,745.6
0
11,796.4
8
20
20
20
2,359.30
1,887.44
1,509.95
9,437.18
7,549.75
6,039.80
25,000.0
0
45,000.0
0
36,000.0
0
28,800.0
0
23,040.0
0
18,432.0
0
14,745.6
0
11,796.4
8
9,437.18
7,549.75
Summary of Methods
Year
1
2
3
4
5
6
7
8
9
10
SL
$5,000
$5,000
$5,000
$5,000
$5,000
$5,000
$5,000
$5,000
$5,000
$5,000
DDB
$10,000
$8,000
$6,400
$5,120
$4,096
$3,277
$2,621
$2,097
$1,678
$1,342
SOYD CCA
$9,091
$5,000.00
$8,182
$9,000.00
$7,273
$7,200.00
$6,364
$5,760.00
$5,455
$4,608.00
$4,545
$3,686.40
$3,636
$2,949.12
$2,727
$2,359.30
$1,818
$1,887.44
$909
$1,509.95
11-6
(a)
Year
1
2
3
SL
SOYD
$15,200 $25,333 (2/5) ($76,000 - $0)
$15,200 $20,267 (2/5) ($76,000 $30,400)
$15,200 $15,200 (2/5) ($76,000 $48,640)
DDB
= $30,400
= $18,240
= $10,944
Undep.
Capital
Cost
at end of
year
4
5
Sum
(b)
= $6,566
= $3,940
$70,090
By looking at the data in Part (a), some students may jump to the conclusion that one
should switch from DDB to Straight Line depreciation at the beginning of Year 3.
This mistaken view is based on the fact that in the table above the Straight Line
depreciation for Year 3 is $15,2000, while the DDB depreciation is only $10,944.
This is not a correct analysis of the situation.
This may be illustrated by computing the Straight Line depreciation for Year 3, if DDB
depreciation had been used in the prior years.
With DDB depreciation for the first two years, the book value at the beginning of Year
3 = $76,000 - $30,400 - $18,240 = $27,360.
SL depreciation for subsequent years = ($27,360 - $0)/3 = $9,120.
Thus, the choice for Year 3 is to use DDB = $10,944 or SL = $9,120. One would
naturally choose to continue with DDB depreciation.
For subsequent years:
If Switch for
Year
4
5
Beginning of
Yr
Book Value
$16,416
$9,850
Remaining
Life
SL = (Book
Salvage)/Remaining Life
2 yrs
1 yr
$8,208
$9,850
When SL is compared to DDB in Part (a), it is apparent that the switch should take
place at the beginning of Year 4. The resulting depreciation schedule is:
Year
1
2
3
4
5
Sum
(c)
Year
Class
No.
43
Undep.
capital
cost at
beginning
of year
0
Cost of
acq.
during
the
year
76,000.0
0
Proceeds
of
disp.
during
the
year
0
Undep.
capital
cost
76,000.00
50% rule
38,000.0
0
Reduced
undep.
capital
cost
38,000.00
CCA
rate
%
Capital
cost
allowance
20
7,600.00
Undep.
Capital
Cost
at end of
year
68,400.0
0
43
68,400.00
68,400.00
0.00
68,400.00
20
43
54,720.00
54,720.00
0.00
54,720.00
20
13,680.0
0
10,944.0
0
43
43,776.00
43,776.00
0.00
43,776.00
20
8,755.20
43
35,020.80
35,020.80
0.00
35,020.80
20
7,004.16
54,720.0
0
43,776.0
0
35,020.8
0
28,016.6
4
11-7
(a) Straight Line
SL
depreciation in any year
= ($45,000 - $0)/5
(b) SOYD
sum = (n/2) (n+1) = (5/2) (5)
= 15
Depreciation in Year 1
= (5/15) ($45,000 - $0)
Gradient
= (1/15) ($45,000 - $0)
= $9,000
= $15,000
= -$3,000
(c) DDB
Year
1
(2/5) ($45,000 - $0)
2
(2/5) ($45,000 $18,000)
3
(2/5) ($45,000 $28,800)
4
(2/5) ($45,000 $35,280)
5
(2/5) ($45,000 $39,168)
DDB
= $18,000
= $10,800
= $6,480
= $3,888
= $2,333
Class
No.
Undep.
capital
cost at
beginning
of year
0
40,500.0
0
32,400.0
0
25,920.0
0
20,736.0
0
Cost of
acq.
during
the
year
Proceeds
of
disp.
during
the
year
45,000.0
0
Undep.
capital
cost
45,000.0
0
40,500.0
0
32,400.0
0
25,920.0
0
20,736.0
0
50% rule
22,500.0
0
0.00
0.00
0.00
0.00
Reduced
undep.
capital
cost
22,500.0
0
40,500.0
0
32,400.0
0
25,920.0
0
20,736.0
0
CCA
rate
%
Capital
cost
allowance
20
4,500.00
20
8,100.00
20
6,480.00
20
5,184.00
20
4,147.20
Undep.
Capital
Cost
at end of
year
40,500.0
0
32,400.0
0
25,920.0
0
20,736.0
0
16,588.8
0
SL
$9,000
$9,000
$9,000
$9,000
$9,000
$45,000
DDB
$18,000
$10,800
$6,480
$3,888
$2,333
$41,501
SOYD
CCA
$15,000
$4,500.00
$12,000
$8,100.00
$9,000
$6,480.00
$6,000
$5,184.00
$3,000
$4,147.20
$45,000 $28,411.20
11-8
CCA rate=30%
Year
Class
No.
Undep.
capital
cost at
beginnin
g
of year
Cost of
acq.
during
the
year
Proceeds
of
disp.
during
the
year
6,500.0
0
5,525.00
3,867.50
2,707.25
1,895.08
Undep.
capital
cost
50%
rule
6,500.0
0
5,525.0
0
3,867.5
0
2,707.2
5
1,895.0
8
Reduced
undep.
capital
cost
CCA
rate
%
Capital cost
allowance
3,250.0
0
3,250.00
30
975.00
0.00
5,525.00
30
1,657.50
0.00
3,867.50
30
1,160.25
0.00
2,707.25
30
812.18
0.00
1,895.08
30
568.52
SL
$1,060
$1,060
$1,060
$1,060
$1,060
$5,300
SOYD
$1,767
$1,413
$1,060
$707
$353
$5,300
DDB
$2,600
$1,560
$936
$204
$0
$5,300
UOP*
$707
$1,178
CCA
$975.00
$1,657.50
$1,160.25
$812.18
$568.52
$5,174.45
Year
1
2
3
4
5
Undep.
Capital
Cost
at end of
year
5,525.0
0
3,867.5
0
2,707.2
5
1,895.0
8
1,326.5
5
11-9
Class 9 asset (CCA rate=25%)
Year
Class
No.
Undep.
capital
cost at
beginnin
g
of year
($1,000)
Cost of
acq.
during
the
year
($1,000)
Proceeds
of
disp.
during
the
year
($1,000)
1,500.0
0
2
3
4
5
9
9
9
9
1,312.50
984.38
738.28
553.71
0
0
0
0
0
0
0
0
Undep.
capital
cost
($1,000)
1,500.0
0
1,312.5
0
984.38
738.28
553.71
50%
rule
($1,000)
Reduced
undep.
capital
cost
($1,000)
CCA
rate
%
Capital
cost
allowance
($1,000)
Undep.
Capital
Cost
at end of
year
($1,000)
750.00
750.00
25
187.50
1,312.5
0
0.00
0.00
0.00
0.00
1,312.50
984.38
738.28
553.71
25
25
25
25
328.13
246.09
184.57
138.43
984.38
738.28
553.71
415.28
Reduced
undep.
capital
cost
CCA
rate
%
Capital
cost
allowance
Undep.
Capital
Cost
at end of
year
11-10
CCA class 8 (CCA rate 20%)
Year
Class
No.
Undep.
capital
cost at
beginning
of year
Cost of
acq.
during
the
year
Proceeds
of
disp.
during
the
year
Undep.
capital
cost
50%
rule
10,000.0
0
10,000.0
0
5,000.0
0
5,000.00
20
1,000.00
9,000.00
9,000.00
0.00
9,000.00
20
1,800.00
7,200.00
7,200.00
0.00
7,200.00
20
1,440.00
5,760.00
5,760.00
0.00
5,760.00
20
1,152.00
4,608.00
4,608.00
0.00
4,608.00
20
921.60
3,686.40
3,686.40
0.00
3,686.40
20
737.28
2,949.12
2,949.12
0.00
2,949.12
20
589.82
2,359.30
2,359.30
0.00
2,359.30
20
471.86
1,887.44
1,887.44
0.00
1,887.44
20
377.49
10
1,509.95
1,509.95
0.00
1,509.95
20
301.99
9,000.0
0
7,200.0
0
5,760.0
0
4,608.0
0
3,686.4
0
2,949.1
2
2,359.3
0
1,887.4
4
1,509.9
5
1,207.9
6
11-11
Class 43 asset (CCA rate=30%)
Year
Class
No.
43
43
43
43
43
43
7
8
9
10
43
43
43
43
Undep.
capital
cost at
beginning
of year
0
63,750.0
0
44,625.0
0
31,237.5
0
21,866.2
5
15,306.3
8
10,714.4
6
7,500.12
5,250.09
3,675.06
Cost of
acq.
during
the
year
Proceeds
of
disp.
during
the
year
75,000.0
0
0
0
0
0
0
0
0
0
Undep.
capital
cost
75,000.0
0
63,750.0
0
44,625.0
0
31,237.5
0
21,866.2
5
15,306.3
8
10,714.4
6
7,500.12
5,250.09
3,675.06
50% rule
37,500.0
0
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Reduced
undep.
capital
cost
37,500.0
0
63,750.0
0
44,625.0
0
31,237.5
0
21,866.2
5
15,306.3
8
10,714.4
6
7,500.12
5,250.09
3,675.06
CCA
rate
%
Capital
cost
allowance
30
11,250.0
0
19,125.0
0
13,387.5
0
30
9,371.25
30
6,559.88
30
4,591.91
63,750.0
0
44,625.0
0
31,237.5
0
21,866.2
5
15,306.3
8
10,714.4
6
30
30
30
30
3,214.34
2,250.04
1,575.03
1,102.52
7,500.12
5,250.09
3,675.06
2,572.54
30
30
11-12
Initial Cost
Useful Life
Salvage Value
CCA Rate
145
5
10
0.3
Year
1
2
3
4
5
6
7
SV-UCC
SL
$27.00
$27.00
$ 27.00
$27.00
$27.00
$--$--$---
SOYD
$45.00
$36.00
$27.00
$18.00
$9.00
$--$--$---
150%DB
$43.50
$30.45
$21.32
$14.92
$10.44
$--$--$14.37
DDB
$58.00
$34.80
$20.88
$12.53
$7.52
$--$--$1.28
CCA
$21.75
$36.98
$25.88
$18.12
$12.68
$--$--$19.59
TOTAL
$135.00
$135.00
$120.63
$133.72
$115.41
11-13
Initial Cost
Useful Life
Salvage Value
1060
5
90
Undep.
Capital
Cost
at end of
year
CCA Rate
Year
1
2
3
4
5
6
7
SV-UCC
TOTAL
SL
$194.00
$194.00
$194.00
$194.00
$194.00
$--$--$--$970.00
40%
SOYD
$323.33
$258.67
$194.00
$129.33
$ 64.67
$--$--$--$970.00
150%DB
$318.00
$222.60
$155.82
$109.07
$ 76.35
$--$--$ 88.15
$881.85
DDB
$424.00
$254.40
$152.64
$ 91.58
$ 54.95
$--$--$ (7.57)
$977.57
CCA
$212.00
$339.20
$203.52
$122.11
$ 73.27
$--$--$ 19.90
$950.10
150%DB
$2,000
$1,500
$1,125
$ 844
$ 633
$ 475
$--$ 824
$6,576
DDB
$2,667
$1,778
$1,185
$ 790
$ 527
$ 351
$--$ 102
$7,298
CCA
$1,600
$2,560
$1,536
$ 922
$ 553
$ 332
$--$ (102)
$7,502
SL
$1,233
$1,233
$1,233
$1,233
$1,233
$1,233
$--$0
$7,400
$8,000
6
$600
40%
SOYD
$2,114
$1,762
$1,410
$1,057
$ 705
$ 352
$--$--$7,400
11-15
Comparison Worksheet
Initial Cost
$ 250,000
Useful Life
15
Salvage Value
0
CCA Rate
0.1
Year
SL
SOYD
1
$16,667
$31,250
2
$16,667
$29,167
3
$16,667
$27,083
4
$16,667
$25,000
5
$16,667
$22,917
6
$16,667
$20,833
7
$16,667
$18,750
8
$16,667
$16,667
9
$16,667
$14,583
10
$16,667
$12,500
11
$16,667
$10,417
12
$16,667
$ 8,333
13
$16,667
$ 6,250
14
$16,667
$ 4,167
15
$16,667
$ 2,083
16
$--$--17
$--$--18
$--$--19
$--$--20
$--$--SV-UCC
$0
$--TOTAL
$250,000
$250,000
i=
NPW of
deprec=
NPW of
balance
Total
NPW
0.2
97,456.2
0.0
97,456.2
150%DB
$25,000
$22,500
$20,250
$18,225
$16,403
$14,762
$13,286
$11,957
$10,762
$ 9,686
$ 8,717
$ 7,845
$ 7,061
$ 6,355
$ 5,719
$--$--$--$--$--$51,473
$198,527
DDB
$33,333
$28,889
$25,037
$21,699
$18,806
$16,298
$14,125
$12,242
$10,610
$ 9,195
$ 7,969
$ 6,906
$ 5,986
$ 5,187
$ 4,496
$--$--$--$--$--$29,223
$220,777
CCA
$12,500
$23,750
$21,375
$19,238
$17,314
$15,582
$14,024
$12,622
$11,360
$10,224
$ 9,201
$ 8,281
$ 7,453
$ 6,708
$ 6,037
$--$--$--$--$--$ 54,332
$195,668
$ 127,119.9
97,469.7 $ 115,957.0
$ 90,807.4
6,325.7 $
$ 127,119.9
3,591.3
103,795.4 $ 119,548.3
Book Values
SL
$ 233,333
$ 216,667
$ 200,000
$ 183,333
$ 166,667
$ 150,000
$ 133,333
$ 116,667
$ 100,000
$ 83,333
$ 66,667
$ 50,000
$ 33,333
$ 16,667
$
0
$
0
$
0
$
0
$
0
$
0
SOYD
$218,750
$189,583
$162,500
$137,500
$114,583
$ 93,750
$ 75,000
$ 58,333
$ 43,750
$ 31,250
$ 20,833
$ 12,500
$ 6,250
$ 2,083
$
(0)
$
(0)
$
(0)
$
(0)
$
(0)
$
(0)
150%DB
$ 225,000
$ 202,500
$ 182,250
$ 164,025
$ 147,623
$ 132,860
$ 119,574
$ 107,617
$ 96,855
$ 87,170
$ 78,453
$ 70,607
$ 63,547
$ 57,192
$ 51,473
$ 51,473
$ 51,473
$ 51,473
$ 51,473
$ 51,473
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
DDB
216,667
187,778
162,741
141,042
122,236
105,938
91,813
79,571
68,962
59,767
51,798
44,892
38,906
33,719
29,223
29,223
29,223
29,223
29,223
29,223
6,677.2
$ 97,484.6
CCA
$237,500
$213,750
$192,375
$173,138
$155,824
$140,241
$126,217
$113,596
$102,236
$ 92,012
$ 82,811
$ 74,530
$ 67,077
$ 60,369
$ 54,332
$ 54,332
$ 54,332
$ 54,332
$ 54,332
$ 54,332
11-16
Comparison Worksheet
Initial Cost
$100,000
Useful Life
5
Salvage Value
$20,000
CCA Rate
30%
Year
1
2
3
4
5
SV-UCC
TOTAL
SL
$16,000
$16,000
$16,000
$16,000
$16,000
$--$80,000
SOYD
$26,667
$21,333
$16,000
$10,667
$ 5,333
$--$80,000
DDB
$40,000
$24,000
$14,400
$ 8,640
$ 1,600
i=
NPW of deprec=
NPW of balance
Total NPW
10%
$60,653
$--$60,653
$64,491
$--$64,491
$73,912
$80,000
$73,912
CCA
$15,000
$25,500
$17,850
$12,495
$ 8,747
$ 409
$80,000
$62,087
$ 254
$62,341
11-17
SOYD Depreciation
Sum = (5/2) (5 + 1) = 15
Year
1
2
3
4
5
Sum
(5/15)
($120,000)
(4/15)
($120,000)
(3/15)
($120,000)
(2/15)
($120,000)
(1/15)
($120,000)
SOYD
= $40,000
PW at Yr 0 at 8%
$37,036
= $32,000
$27,434
= $24,000
$19,051
= $16,000
$11,760
= $8,000
$5,445
= $120,000 = $100,726
($15,000/$40,000) ($120,000)
($11,000/$40,000) ($120,000)
($4,000/$40,000) ($120,000)
($6,000/$40,000) ($120,000)
($4,000/$40,000) ($120,000)
UOP
= $45,000
= $33,000
= $12,000
= $18,000
= $12,000
PW at Yr 0 at 8%
$41,666
$28,291
$9,526
$13,230
$8,167
Sum
= $120,000 = $100,880
(2.4)($10,000 - $0)
(2/4)($10,000 - $5,000)
DDB
= $5,000
= $2,500
11-19
See solution to 11-8.
11-20
See solution to 11-15.
11-21
(1) Use Table 11-1 to find the MACRS GDS Property Class for each asset:
(a) CCA class 10 asset
(b) CCA class 43 asset
(c) CCA class 1 asset
(2) Depreciation in year 3
(a) Dep3=$3,034.50
(b) Dep3=$5,355.00
(c) Dep3=$4,892.16
(3) Book Value = Cost Basis Sum of Depreciation Charges
(a)
$17,000 - $14,571.39 = $2,428.61
(b)
$30,000 - $25,714.22 = $4,285.78
(c)
$130,000 - $26,121.52
= $103,878.48
11-22
Year
Class
No.
1
2
3
4
5
1
1
1
1
1
Undep.
capital
cost at
beginning
of year
($1,000)
Cost of
acq.
during
the
year
($1,000)
0
588.00
564.48
541.90
520.22
600.00
0
0
0
0
Proceeds
of
disp.
during
the
year
($1,000)
0
0
0
0
0
Undep.
capital
cost
($1,000)
50%
rule
($1,000)
Reduced
undep.
capital
cost
($1,000)
600.00
588.00
564.48
541.90
520.22
300.00
0.00
0.00
0.00
0.00
300.00
588.00
564.48
541.90
520.22
CCA
rate
%
Capital
cost
allowance
($1,000)
Undep.
Capital
Cost
at end
of year
($1,000)
12.00
23.52
22.58
21.68
20.81
588.00
564.48
541.90
520.22
499.42
Capital
cost
allowance
($1,000)
Undep.
Capital
Cost
at end
of year
($1,000)
17.00
33.32
31.99
30.71
833.00
799.68
767.69
736.99
4
4
4
4
4
Class
No.
1
2
3
4
1
1
1
1
Undep.
capital
cost at
beginning
of year
($1,000)
Cost of
acq.
during
the
year
($1,000)
0
833.00
799.68
767.69
850.00
0
0
0
Proceeds
of
disp.
during
the
year
($1,000)
0
0
0
0
Undep.
capital
cost
($1,000)
50%
rule
($1,000)
Reduced
undep.
capital
cost
($1,000)
850.00
833.00
799.68
767.69
425.00
0.00
0.00
0.00
425.00
833.00
799.68
767.69
CCA
rate
%
4
4
4
4
(d)
Year
0
1- 20
20
$80,000
Cash
Flow
-$80,000
+$28,000
-$18,000
+$20,000
= ($28,000 - $18,000) (P/A, i%, 20) + $20,000 (P/F, i%, 20)
= $88,112
$80,000
Try i = 12%
($10,000) (7.469) + $20,000 (0.1037)
= $76,764
$80,000
= $5,714
= $5,429
Sum = $11,143
1
2
3
Class
No.
Undep.
capital
cost at
beginning
of year
($1,000)
Cost of
acq.
during
the
year
($1,000)
0
85.00
59.50
100.00
0
0
43
43
43
Proceeds
of
disp.
during
the
year
($1,000)
0
0
0
Undep.
capital
cost
($1,000)
50%
rule
($1,000)
Reduced
undep.
capital
cost
($1,000)
100.00
85.00
59.50
50.00
0.00
0.00
50.00
85.00
59.50
CCA
rate
%
Capital
cost
allowance
($1,000)
Undep.
Capital
Cost
at end
of year
($1,000)
15.00
25.50
17.85
85.00
59.50
41.65
30
30
30
11-26
Year
Undep.
capital
cost at
beginning
of year
Cost of
acq.
during
the
year
Proceeds
of
disp.
during
the
year
20,000.0
0
17,000.00
Undep.
capital
cost
20,000.0
0
17,000.0
0
50% rule
10,000.0
0
0.00
Reduced
undep.
capital
cost
10,000.0
0
17,000.0
0
CCA
rate
%
Capital
cost
allowance
30
3,000.00
30
5,100.00
SL
$50,000
$6,250
$6,250
$37,500
$(22,500)
$(12,500)
$12,500
Undep.
Capital
Cost
at end of
year
17,000.0
0
11,900.0
0
11-28
Gross income from sand and gravel
$0.65/m3 (45,000 m4) = $29,250
To engineering student
- $2,500
Taxable Income inc. depletion = $26,750
Percentage depletion = 5% ($29,250) = $1,462.50
Therefore, allowable depletion is $1,462.50.
11-29
Mr. Salts cost of depletion
Percentage depletion
SOYD Depreciation
$120,000
$105,000
$90,000
$75,000
$60,000
$45,000
$30,000
$15,000
$540,000
= $3,000
= $540,000/21,600 hours
= $25/hr
1
2
3
4
5
6
7
8
Sum
6,000
4,000
4,000
1,600
800
800
2,200
2,200
11-31
11-32
11-33
See solution to problem 11.16
$150,000
$100,000
$100,000
$40,000
$20,000
$20,000
$55,000
$55,000
$540,000
11-34
Comparison Worksheet
Initial Cost
Useful Life
Salvage Value
CCA Rate
Year
1
2
3
4
5
6
SL
$15,000
$15,000
$15,000
$15,000
$15,000
$15,000
100000
6
10000
20%
BV
$85,000
$70,000
$55,000
$40,000
$25,000
$10,000
Sum Of Year
$25,714
$21,429
$17,143
$12,857
$ 8,571
$ 4,286
11-35
Year
1
2
3
4
5
6
7
8
9
10
CCA
$175,000
$315,000
$252,000
$201,600
$161,280
$129,024
$103,219
$ 82,575
$ 66,060
$ 52,848
BV
$74,286
$52,857
$35,714
$22,857
$14,286
$10,000
CCA
$10,000
$18,000
$14,400
$11,520
$ 9,216
$ 7,373
UCC
$90,000
$72,000
$57,600
$46,080
$36,864
$29,491