Consider the following ($ in thousands): Cost of the asset, B $900 Depreciable life, in years, N 5 Salvage value, S $70 Compute the straight-line depreciation schedule.

Question

Consider the following [latex](\$ in thousands)[/latex]:

Cost of the asset, B [latex]\$900[/latex]

Depreciable life, in years, N 5

Salvage value, S [latex]\$70[/latex]

Compute the straight-line depreciation schedule.

Accepted Answer

Annual depreciation charge [latex]=d_{t}=\frac{B-S}{N}=\frac{900-70}{5}=\$166[/latex]

Year, t	Depreciation for Year [latex]t\left( \$000 \right),d_{t}[/latex]	Sum of Depreciation Charges Up to Year t [latex]\left( \$000 \right),\sum_{i=1}^{t} d_{j}[/latex]	Book Value at the End of Year [latex]\left( \$000 \right),BV_{t}=B-\sum_{j=1}^{t}d_{j}[/latex]
	[latex]\$166[/latex]	[latex]\$166[/latex]	900 - 166 = 734
2	166	332	900 - 332 = 568
3	166	498	900 - 498 = 402
4	166	664	900 - 664 = 236
5	166	830	900 - 830 = 70 = S

This situation is illustrated in Figure 11-3. Notice that [latex]d_{t}[/latex] is constant at [latex]\$166,000[/latex] each year for five years, and that the asset has been depreciated down to a BV of [latex]\$70,000,[/latex] which was the estimated salvage value.

Year, t	Depreciation for Year $t\left( \$000 \right),d_{t}$	Sum of Depreciation Charges Up to Year t $\left( \$000 \right),\sum_{i=1}^{t} d_{j}$	Book Value at the End of Year $\left( \$000 \right),BV_{t}=B-\sum_{j=1}^{t}d_{j}$
	$\$166$	$\$166$	900 – 166 = 734
2	166	332	900 – 332 = 568
3	166	498	900 – 498 = 402
4	166	664	900 – 664 = 236
5	166	830	900 – 830 = 70 = S

Question 11.2: Consider the following ($ in thousands): Cost of the asset, ...

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