Question

(a) A sugar refinery plant purchased one unit of turbo alternator with a cost of RM70,000 with salvage value of RM 6,000 by the end of its life of 5 years. Use Double Deduction Balance (DDB) method to determine the depreciation and Book Value by filling up Year Beginning Rate Depreciation Accumulated End Book Value Depreciation Value [Tahun] [Nilai [Kadar] [Susutan] [Susutan [Nilai Buku Permulaan Terkumpul] Akhir 1 2 2 3 4 5 (8 Marks / Markah) (b) An electrical project manager is considering THREE (3) alternatives for the installation of bucket elevator to increase plant output. Alternative A Alternative B Alternative C [Alternatif 4] Alternatif B] [Alternatif C] First cost, RM 22,000 35,000 38,000 Annual operating cost, 2,500 1,500 3,300 RM Salvage value, RM 1,300 3,800 0 Life, years 4 6 9 (i) Construct cash flow diagram (CFD) for above three alternatives. (ii) Choose the best alternative using Annual Worth (AW) analysis at interest rate of 9% per year.

answer

Answer 1

Straight line Depreciation = (1 / Life) = (1 / 5) = 0.2 which is 20%

Rate of Double declining method of depreciation = Straight line depreciation * 2 = 20% * 2 = 40%

Depreciation = Beginning value * Rate

Accumulated value = Sum of all depreciation amount

End book value = Beginning value - Depreciation

In 5th year, the depreciation was 3,628.8 which was reducing salvage value, so we had to adjust depreciation of 5th yera to 3,072 such that salvage value is 6,000.

Year	Beginning Value	Rate	Depreciation	Accumulated Value	End Book Value
1	70000	40%	28000	28000	42000
2	42000	40%	16800	44800	25200
3	25200	40%	10080	54880	15120
4	15120	40%	6048	60928	9072
5	9072	40%	3072	64000	6000