4.2 - Depreciation
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Practice Questions
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What is ownership cost?
💡 Hint: Think about what costs you continue to incur even when not using the equipment.
Explain operating cost.
💡 Hint: They depend on how much we use the equipment.
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Interactive Quizzes
Quick quizzes to reinforce your learning
What components make up ownership costs?
💡 Hint: Think of what costs are recurring regardless of usage.
Is the Straight Line Depreciation method commonly used?
💡 Hint: Does it provide consistent annual depreciation?
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Challenge Problems
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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.
💡 Hint: 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.
💡 Hint: 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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