2.3. Book Value and Salvage Value Considerations

Try these first

1. 1.

   Define 'salvage value'.

   Hint

   Consider what an asset is expected to be worth after it's no longer usable.

2. 2.

   What is book value?

   Hint

   Think of it as the net worth of the asset.

3. 3.

   What does SYD stand for?

   • Standard Year Depreciation
   • Sum of the Years Digits
   • Single Year Depreciation

   Hint

   Think about how years are used in the calculation.

4. 4.

   True or False: DDB considers salvage value when calculating depreciation.

   • True
   • False

   Hint

   Recall how DDB operates during its calculations.

5. 5.

   A factory purchases a machine for ₹15,000,000, with a salvage value of ₹1,500,000, and a life expectancy of 10 years. Calculate the depreciation for the first three years using SYD.

   Hint

   Remember to sum the digits first!

6. 6.

   If a company decides to switch from DDB to straight-line after year 5 because of low book value, detail the necessary steps for the transition.

   Hint

   Think about how to find the accurate book value first at the end of year 5.