1.

Freeport-McMoRan Mining Company has purchased a computer-controlled

gold ore grading unit for $80,000. The unit has an anticipated life of 10
years and a salvage value of $10,000. Use SL, DDB and SYD methods to

2.

account depreciation and book values for each year.

A nickel mine was purchased for $10 million. It has an anticipated gross
income of $5.0 million per year for years 1 to 5 and $3.0 million per year
after year 5. Assume that depletion charges do not exceed 50% of taxable
income. Compute annual depletion amounts for the mine. How long will it

3.

take to recover the initial investment at i = 0%?

A fiber optics testing device is to be DDB depreciated. It has a first cost of
$25,000 and an estimated salvage of $2500 after 12 years. (a) Calculate
the depreciation and book value for years 1 and 4. (b) Calculate the
implied salvage value after 12 years.

Jawab:
1. Number 1
a. Menggunakan SL
Depreciation expanse per year =

Year

Depreciation
expense (debit)

costresidual value
yearsof use life

Accumulated
depreciation
(credit)

Accumulated
depreciation
balance

Underpreciated
balance (book
value)
$

$7,000

$7,000

$7,000

$7,000

$7,000

$14,000

$7,000

$7,000

$21,000

$7,000

$7,000

$28,000

$7,000

$7,000

$35,000

$7,000

$7,000

$42,000

$7,000

$7,000

$49,000

$7,000

$7,000

$56,000

$7,000

$7,000

$63,000

80,000.00
$
73,000
$
66,000
$
59,000
$
52,000
$
45,000
$
38,000
$
31,000
$
24,000
$

10

$7,000

$7,000

$70,000

$ 70,000

17,000
$
10,000

$70,000

b. Menggunakan DDL (Double-declining balance)

Depreciation expanse per year= remaining book value x acceleration
depretion rate

Year

Computation

80000 x 0.2

64000 x 0.2

51200 x 0.2

40960 x 0.2

32768 x 0.2

26214.4 x 0.2

20971.52 x 0.2

16777.216 x 0.2

9
10

13421.7728 x
0.2
10737.41824 x
0.2

Total
Depreciat
ion

Depr.
Expense

Accumulated
deprecitation

Book value

$
16,000.00
$
12,800.00
$
10,240.00
$
8,192.00
$
6,553.60
$
5,242.88
$
4,194.30
$
3,355.44
$
2,684.35
$
737.42

$
16,000.00
$
28,800.00
$
39,040.00
$
47,232.00
$
53,785.60
$
59,028.48
$
63,222.78
$
66,578.23
$
69,262.58
$
70,000.00

$
64,000.00
$
51,200.00
$
40,960.00
$
32,768.00
$
26,214.40
$
20,971.52
$
16,777.22
$
13,421.77
$
10,737.42
$
10,000.00

$
70,000.00

c. Menggunakan SYD (Sum of the year digits)

Depreciation expanse per year = (cost residual value) x Dep rate first
year

Year

Computation

Depr.
Expense

Accumulated
deprecitation

Book value
$

80,000

70000 x 10/55

70000 x 9/55

70000 x 8/55

70000 x 7/55

70000 x 6/55

70000 x 5/55

70000 x 4/55

70000 x 3/55

70000 x 2/55

10

70000 x 1/55

Total
Depreciat
ion

$
12,727.27
$
11,454.55
$
10,181.82
$
8,909.09
$
7,636.36
$
6,363.64
$
5,090.91
$
3,818.18
$
2,545.45
$
1,272.73

$
12,727.27
$
24,181.82
$
34,363.64
$
43,272.73
$
50,909.09
$
57,272.73
$
62,363.64
$
66,181.82
$
68,727.27
$
70,000.00

$
67,272.73
$
55,818.18
$
45,636.36
$
36,727.27
$
29,090.91
$
22,727.27
$
17,636.36
$
13,818.18
$
11,272.73
$
10,000.00

$
70,000.00

2. Number 2
A 15% depletion applies to nickel. Depletion amounts are
Years 1 to 5:
0.15(5.0 million) = $750,000
Years thereafter:
0.15(3.0 million) = $450,000
A total of $3.75 million is written off in 5 years, and the remaining $6.25
million is written off at $450,000 per year. The total number of years is
5+

$ 6.25 million
$ 450000

= 5 + 13.9 = 18.9 = 19

In 19 years, the initial investment could be fully depleted.

3. Number 3
(a) The DDB fixed depreciation rate is d = 21n = 2/12 = 0.1667 per year.
Use equations:
Year 1:
D1= (0.1667)(25000)(1 - 0.1667)1 - 1 = $4167
BV1 = 25000(1 - 0.1667)1 = $20833
Year 4:

D4 = (0.1667)(25000)(1 - 0.1667)4-1 = $2411

BV4 = 25000(1 - 0.1667)4 = $12054

(b) From the equation, the implied salvage value after 12 years is
Implied S = 25000(1 - 0.1667)12 = $2803
Since the estimated S = $2500 is less than $2803, the asset is not fully
depreciated when its 12-year expected life is reached.