LLED has purchased a new chip making machine for $1,500,000 with a salvage value of $100,000 in 10 years. The LLED company is trying to determine the best method of depreciation. Create a table and calculate the deprecation amount for each year using straight line, double declining balance, and MACRS (10 yr property class). For SL and DDB we will not depreciate below the salvage value. Using a MARR of 10% calculate the present worth of the depreciation deductions. Which is the preferred method of depreciation for LLED?
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
LLED has purchased a new chip making machine for $1,500,000 with a salvage value of $100,000
in 10 years. The LLED company is trying to determine the best method of depreciation. Create a
table and calculate the deprecation amount for each year using straight line, double declining
balance, and MACRS (10 yr property class). For SL and DDB we will not
salvage value. Using a MARR of 10% calculate the present worth of the depreciation deductions.
Which is the preferred method of depreciation for LLED?
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