QUESTION 12construction finance A piece of equipment is purc

QUESTION 12-construction finance

A piece of equipment is purchased for $110,000 and has an estimated salvage value of $10,000 at the end of the useful life. Prepare a sum of the years depreciation schedule with a useful life of eight years.

What is the depreciation amount of 8th year?

5,555.56

12,777.78

13,888.89

2,777.78

Solution

Depreciation base = 110,000-10,000

=100,000 $

Depreciation fraction for 8th year = 1/36

(36=1+2+3+...+8)

Depreciation value for 8th year = dep. Base × fraction

=100,000×(1/36)

=2777.78 $