EXAMPLE 4.

3
A laser surgical tool has a cost basis of $200,000 and a five-year depreciable life. The estimated S.V.
of the laser is $20,000 at the end of five years. Tabulate the annual depreciation amounts and the
book value of the laser at the end of each year using:
(a) Straight line depreciation;
(b) Sum-of-years-digits depreciation;
(c) Double declining balance depreciation
Solution Year DC($) Total Dep.(n) ($) B.V.(n) ($)
𝑷 = $𝟐𝟎𝟎, 𝟎𝟎𝟎 , 𝑺 = $𝟐𝟎, 𝟎𝟎𝟎 , 𝐍 = 𝟓 𝐲𝐞𝐚𝐫𝐬 0 0 0 200,000
(a) Straight line depreciation 1 36,000 36,000 164,000
𝟏
𝑫𝑪 = 𝑷 − 𝑺 = $36,000 2 36,000 72,000 128,000
𝑵
3 36,000 108,000 92,000
4 36,000 144,000 56,000
5 36,000 180,000 20,000

Dr. Abdelmagid A. Abdalla Lecture 8 12/17/2020 1

 Year DC(n)($) Total Dep.(n) ($) B.V.(n) ($)
(b) Sum-of-years-digits depreciation
0 0 0 200,000
𝟐 𝑵−𝒏+𝟏
𝑫𝑪 𝒏 = 𝑷−𝑺 1 60,000 60,000 140,000
𝑵 𝑵+𝟏
2 48,000 108,000 92,000
𝟐 𝟓−𝒏+𝟏
𝑫𝑪 𝒏 = 𝟐𝟎𝟎, 𝟎𝟎𝟎 − 𝟐𝟎, 𝟎𝟎 3 36,000 144,000 56,000
𝟓×𝟔
4 24,000 168,000 32,000
𝑫𝑪 𝒏 = 𝟏𝟐, 𝟎𝟎𝟎(𝟔 − 𝒏)
5 12,000 180,000 20,000

Year DDB(n)($) Total Dep.(n) ($) B.V.(n) ($)

(c) Double declining balance depreciation 0 0 0 200,000
𝟐
𝑫𝑫𝑩 𝒏 = 𝑩. 𝑽. 𝒏 − 𝟏 1 80,000 80,000 120,000
𝑵 2 48,000 128,000 72,000
3 28,800 156,800 43,200
4 17,280 174,080 25,920
5 10,368 184,448 15,512
Dr. Abdelmagid A. Abdalla Lecture 8 12/17/2020 2
EXAMPLE 4.4
A new electric saw for cutting small pieces of lumber in a furniture manufacturing plant has a cost
basis of $4,000 and a 10-year depreciable life. The estimated S.V. of the saw is zero at the end of 10
years. Tabulate the annual depreciation Year DC($) Total Dep.(n) ($) B.V.(n) ($)
amounts and the book value at the end of 0 0 0 4,000
each year using: 1 400 400 3600
(a) Straight line depreciation; 2 400 800 3200
(b) Sum-of-years-digits depreciation; 3 400 1200 2800
(c) Double declining balance depreciation 4 400 1600 2400
.Solution 5 400 2000 2000
𝑷 = $𝟒, 𝟎𝟎𝟎 , 𝑺 = 𝐙𝐞𝐫𝐨 , 𝐍 = 𝟏𝟎 𝐲𝐞𝐚𝐫𝐬 6 400 2400 1600
(a) Straight line depreciation 7 400 2800 1200
𝟏 8 400 3200 800
𝑫𝑪 = 𝑷 − 𝑺 = $400
𝑵 9 400 3600 400
10 400 4000 Zero
Dr. Abdelmagid A. Abdalla Lecture 8 12/17/2020 3
(b) Sum-of-years-digits depreciation
𝟐 𝑵−𝒏+𝟏
𝑫𝑪 𝒏 = 𝑷−𝑺 Yea DC(n)($) Total Dep.(n) ($) B.V.(n) ($)
𝑵 𝑵+𝟏
r
𝟐 𝟏𝟎 − 𝒏 + 𝟏
𝑫𝑪 𝒏 = 𝟒, 𝟎𝟎𝟎 − 𝟎 0 0 0 4,000
𝟏𝟎 × 𝟏𝟏
1 8,000/11 8,000/11 36,000/11
𝟖𝟎𝟎
𝑫𝑪 𝒏 = (𝟏𝟏 − 𝒏) 2 7,200/11 15,200/11 28,800/11
𝟏𝟏 3 6,400/11 21,600/11 22,400/11
4 5,600/11 27,200/11 16,800/11
5 4,800/11 32,000/11 12,000/11
6 4,000/11 36,000/11 8000/11
7 3,200/11 39,200/11 4,800/11
8 2,400/11 41,600/11 2,400/11
9 1,600/11 43,200/11 800/11
10 800/11 4000 zero

Dr. Abdelmagid A. Abdalla Lecture 8 12/17/2020 4

(c) Double declining balance depreciation Year DDB(n)($) Total Dep.(n) B.V.(n) ($)
𝟐 ($)
𝑫𝑫𝑩 𝒏 = 𝑩. 𝑽. 𝒏 − 𝟏 0 0 0 4,000
𝑵
1 800 800 3,200
2 640 1440 2,560
3 512 1,952 2,048
4 409.6 2,361.6 1638.4
5 327.68 2689.28 1310.72
6 262.144 2951.424 1048.576
7 209.7152 3161.1392 838.8608
8 167.77216 3328.91136 671.08864
9 134.217728 3463.129088 536.870912
10 107.3741824 3570.50327 429.4967296

Dr. Abdelmagid A. Abdalla Lecture 8 12/17/2020 5

EXAMPLE 4.5
The La Salle Bus Company has decided to purchase a new bus for $85,000 with a trade-in of their old
bus. The old bus has a BV of $10,000 at the time of the trade-in. The new bus will be kept for 9 years
before being sold. Its estimated S.V. at that time is Year DC($) Total Dep.(n) ($) B.V.(n) ($)
expected to be $5,000. Calculate the depreciation 0 0 0 95,000
amounts and the book value at the end of each year 1 10,000 10,000 85,000
using: 2 10,000 20,000 75,000
(a) Straight line depreciation; 3 10,000 30,000 65,000
(b) Sum-of-years-digits depreciation; 4 10,000 40,000 55,000
(c) Double declining balance depreciation 5 10,000 50,000 45,000
.Solution 6 10,000 60,000 35,000
𝑷 = 𝟖𝟓, 𝟎𝟎𝟎 + 𝟏𝟎, 𝟎𝟎𝟎 = $𝟗𝟓, 𝟎𝟎𝟎 7 10,000 70,000 25,000
𝑷 = $𝟗𝟓, 𝟎𝟎𝟎 , 𝑺 = $𝟓, 𝟎𝟎𝟎 , 𝐍 = 𝟗 𝐲𝐞𝐚𝐫𝐬 8 10,000 80,000 15,000
(a) Straight line depreciation 9 10,000 90,000 5,000
𝟏
𝑫𝑪 = 𝑷 − 𝑺 = $𝟏𝟎, 𝟎𝟎𝟎
𝑵
Dr. Abdelmagid A. Abdalla Lecture 8 12/17/2020 6
(b) Sum-of-years-digits depreciation
𝟐 𝑵−𝒏+𝟏
𝑫𝑪 𝒏 = 𝑷−𝑺
𝑵 𝑵+𝟏
Year DC(n)($) Total Dep.(n) ($) B.V.(n) ($)
𝟐 𝟗−𝒏+𝟏
𝑫𝑪 𝒏 = 𝟗𝟓, 𝟎𝟎𝟎 − 𝟓, 𝟎𝟎𝟎 0 0 0 95,000
𝟗 × 𝟏𝟎 1 18,000 18,000 77,000
𝑫𝑪 𝒏 = 𝟐, 𝟎𝟎𝟎(𝟏𝟎 − 𝒏)
2 16,000 34,000 61,000
3 14,000 48,000 47,000
4 12,000 60,000 35,000
5 10,000 70,000 25,000
6 8,000 78,000 17,000
7 6,000 84,000 11,000
8 4,000 88,000 7,000
9 2,000 90,000 5,000

Dr. Abdelmagid A. Abdalla Lecture 8 12/17/2020 7

(c) Double declining balance depreciation Year DDB(n)($) Total Dep.(n) ($) B.V.(n) ($)
𝟐
𝑫𝑫𝑩 𝒏 = 𝑩. 𝑽. 𝒏 − 𝟏 0 0 0 95,000
𝑵 1 21,111 21,111 73,888
2 16,419.753 37530.864 57469.136
3 12,770.919 50,301.783 44,698.216
4 9,932.937 60,234.720 34,765.2799
5 7,725.617 67,969.150 27,030.849
6 6,006.855 73,969.005 21,023.994
7 4,671.998 78,641.003 16,358.997
8 3,635.332 82,276.335 12,723.664
9 2,827.480 85,103.815 9,896.184

Dr. Abdelmagid A. Abdalla Lecture 8 12/17/2020 8

EXAMPLE 4.6
Trucks purchased by a delivery company cost $7000 each. Past records indicate the trucks would
have a useful life of five years. They can be sold for an average of $1000 each after 5 years of use.
Calculate the depreciation amounts and the book value at the end of each year using:
(a)Straight line depreciation;
(b) Sum-of-years-digits depreciation;
(c) Double declining balance depreciation
Year DC($) Total Dep.(n) ($) B.V.(n) ($)
Solution
𝑷 = $𝟕, 𝟎𝟎𝟎 , 𝑺 = $𝟏, 𝟎𝟎𝟎 , 𝐍 = 𝟓 𝐲𝐞𝐚𝐫𝐬 0 0 0 7000

(a) Straight line depreciation 1 1,200 1,200 5,800

𝟏 2 1,200 2,400 4,600
𝑫𝑪 = 𝑷 − 𝑺 = $𝟏, 𝟐𝟎𝟎 3 1,200 3,600 3,400
𝑵
4 1,200 4,800 2,200
5 1,200 6,000 1,000

Dr. Abdelmagid A. Abdalla Lecture 8 12/17/2020 9

(b) Sum-of-years-digits depreciation Year DC(n)($) Total Dep.(n) ($) B.V.(n) ($)
𝟐 𝑵−𝒏+𝟏 0 0 0 7000
𝑫𝑪 𝒏 = 𝑷−𝑺
𝑵 𝑵+𝟏
1 2,000 2,000 5,000
𝟐 𝟓−𝒏+𝟏 2 1,600 3,600 3,400
𝑫𝑪 𝒏 = 𝟕, 𝟎𝟎𝟎 − 𝟏, 𝟎𝟎𝟎
𝟓×𝟔 3 1,200 4,800 2,200
𝑫𝑪 𝒏 = 𝟒𝟎𝟎(𝟔 − 𝒏) 4 800 5,600 1,400
5 400 6,000 1,000

Year DDB($) Total Dep.(n) ($) B.V.(n) ($)

0 0 0 7000
(c) Double declining balance depreciation
𝟐 1 2,800 2,800 4,200
𝑫𝑫𝑩 𝒏 = 𝑩. 𝑽. 𝒏 − 𝟏 2 1,680 4,480 2,520
𝑵
3 1008 5488 1512
4 604.8 6092.8 907.2
5 362.88 6,455.68 544.32

Dr. Abdelmagid A. Abdalla Lecture 8 12/17/2020 10

EXAMPLE 4.7
The cost of a new asset is $900 and its useful life is five years. If the salvage value is estimated to
be $30, compute the depreciation charts using:
(a)Straight line depreciation;
(b) Sum-of-years-digits depreciation;
(c) Double declining balance depreciation
Solution
𝑷 = $𝟗𝟎𝟎, 𝑺 = $𝟑𝟎, 𝐍 = 𝟓 𝐲𝐞𝐚𝐫𝐬 Year DC($) Total Dep.(n) ($) B.V.(n) ($)
(a) Straight line depreciation 0 0 0 900
𝟏 1 174 174 726
𝑫𝑪 = 𝑷 − 𝑺 = $𝟏𝟕𝟒
𝑵 2 174 348 552
3 174 522 378
4 174 696 204
5 174 870 30

Dr. Abdelmagid A. Abdalla Lecture 8 12/17/2020 11

(b) Sum-of-years-digits depreciation Year DC(n)($) Total Dep.(n) ($) B.V.(n) ($)
𝟐 𝑵−𝒏+𝟏 0 0 0 900
𝑫𝑪 𝒏 = 𝑷−𝑺
𝑵 𝑵+𝟏 1 290 290 610
𝟐 𝟓−𝒏+𝟏 2 232 512 388
𝑫𝑪 𝒏 = 𝟗𝟎𝟎 − 𝟑𝟎
𝟓×𝟔 3 174 686 114
𝑫𝑪 𝒏 = 𝟓𝟖(𝟔 − 𝒏) 4 116 812 88
5 58 870 30

Year DDB($) Total Dep.(n) ($) B.V.(n) ($)

(c) Double declining balance depreciation 0 0 0 900
𝟐 1 360 360 540
𝑫𝑫𝑩 𝒏 = 𝑩. 𝑽. 𝒏 − 𝟏
𝑵 2 216 576 324
3 129.6 705.6 194.4
4 77.76 783.36 116.64
5 46.656 830.016 69.984
Dr. Abdelmagid A. Abdalla Lecture 8 12/17/2020 12