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4 cards from this section. Quick, good the night before a test.
What is ownership cost?
Think about what costs you continue to incur even when not using the equipment.
Explain operating cost.
They depend on how much we use the equipment.
What components make up ownership costs?
Think of what costs are recurring regardless of usage.
Is the Straight Line Depreciation method commonly used?
Does it provide consistent annual depreciation?
A construction company purchases a bulldozer for $200,000 with an expected lifespan of 10 years and a $20,000 salvage value. Calculate the annual depreciation using the Straight Line and the Double Declining Balance method.
For the Straight Line, remember to subtract salvage from initial cost and divide by useful life.
If a machine has an initial cost of $150,000, a useful life of 5 years, and a salvage value of $15,000, calculate the second year depreciation using the Sum of the Years Digits method.
You will need to calculate the total sum of years and then apply it to the remaining life of the asset.
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