Question

Fixed Asset Discussion: Identify a type of company in your pathway that might purchase fixed assets (see suggestions below). List 5 fixed assets that they might purchase to run their business. Select one depreciable fixed asset. Based on research suggest what the cost, residual value and estimated life might be for that fixed asset. Using your assumptions above, calculate: Straight-line depreciation and book value for each of the first two years Declining Balance depreciation and book value for each of the first two years Units of Production depreciation (make assumptions about the first two year’s use), and book value for each of the first two years. Suggest which depreciation method might be more appropriate and why.

Answer 1

MACAO A B C & Co rans 3 m Here I assumed that I have an farbesny and. I have an farbro & the business there are many fixed Assets. Freehold hand $ 500,000 blant & Machinery -$10,000 Furniture - $5000 Land & Building → $ 150,000 Car & 50,000 Here I we depreciated the plant & Machinery Strap value 5000 life span 10 years. ng Depreciation under Straight line Method. and flaut & Machinery $10,000 Serap value + $500 W life Span 10 yearers. Depreciation - Arts & 10,000 - $500 10 = 9500 TO = 950 ralue of machinery $10,000 69 Depreciation ( Isten) 950 9050 E2 Depreciation 950 8100 (2nd year loo

In Declining balance Method. It is assumed that rate of depreciation is 10% value of hatent a maching & So, Ist year 10,000 ( Repreciation 10% 1000 900 900 e Depreciation 107, 8200 At the end of two years the book value of the plant and Machinery in two Cases are equal. Both can be suitable but we consider Declining balancing Method because the straight line Method is not suitable for all the assets its applicable. ter Iu kwiniture future the plant and Machiney e can b futher purchased, then it us become complicated to calculate it. this method odces not considero Change in price. If new assets are purchased it will Create problem in determination of sale. . So, though the verbs book value are same & at the end of two year, I recommend yo We this I think that declining method is very suitable to aroid probleins in future,