Question

An equipment for petroleum refining was purchased and placed in service by a large petroleum company. It costs $85000 with a trade in of the old unit which is valued at $15000. The new asset has an estimated MV (market value) of $15000 at the end of an estimated useful life of 16 years. Compute the depreciation amount in eighth year (d8) and the BV at the end of the fourteenth year (BV14) of life using each of the GDS and ADS method. d8(GDS) = BV14(GDS) = __; d8(ADS) = __; BV14(ADS) = __;

Answer 1

Cost ($)	85,000
Salvage Value ($)	15,000
Depreciable Value ($)	70,000
No of years	16

d8 (GDS) ($)	4,087	Refer Table 1 below
BV14 (GDS) ($)	18,703	Refer Table 1 below
d8 (ADS) ($)	4,375	Depreciable Value/ No of years
BV14 (ADS) ($)	23,750	Cost- (Depreciation*14)

Table -1 (GDS)
Year	Opening Value	Depreciation @ 10.25%	Closing Value
1	85,000	8,713	76,288
2	76,288	7,819	68,468
3	68,468	7,018	61,450
4	61,450	6,299	55,151
5	55,151	5,653	49,498
6	49,498	5,074	44,425
7	44,425	4,554	39,871
8	39,871	4,087	35,784
9	35,784	3,668	32,117
10	32,117	3,292	28,825
11	28,825	2,955	25,870
12	25,870	2,652	23,218
13	23,218	2,380	20,839
14	20,839	2,136	18,703
15	18,703	1,917	16,786
16	16,786	1,786	15,000