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section 7 modified-2.pdf

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1. The document discusses four methods of calculating depreciation: straight line, use or production, double declining balance, and sum of years digits. 2. It provides the formulas for calculating depreciation under each method and works through an example problem to calculate the depreciation each year for a car purchased for $200,000 and sold for $100,000 over 10 years. 3. Using the straight line method, depreciation is $10,000 per year. Using the use or production method, depreciation ranges from $882 to $33,921 over the 10 years. Using the double declining balance method, depreciation declines from $40,000 to $7,272

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Economics of Chemical Plants Eng. Kareem H. Mokhtar
Depreciation Straight line method D= ! " * ( ) Use or production method d= ( #$% &" '(% )%*+ ,-'*. /$% ) ( ) Double declining balance method: d = 2 * (1/n) * remaining cost Sum of years digits method i = ( #$%0/. $%+1&2% .&0% +%3*&"&"4 $/3 -0 )%*+$ ) * (Vo-Vs)
Question 1 A 2020 car costs 200,000 L.E, if you will buy this car and sell it at 2030 with expected price of 100,000 L.E. you predict that you will be using it each year 1.5 times more than the previous year with total of 200,000 Km. Calculate the depreciation using 1- straight line method 2- use or production method 3- Double declining method 3- sum of years digits
Straight line method D= ! " * ( ) D = (1/10) * (200000-100000) = 10000 $ each year use or production method d= ( #$% &" '(% )%*+ ,-'*. /$% ) ( ) Year Use 2020 x 2021 1.5x 2022 1.5*1.5x : : 2030 ..
year Use (f(x)) Dep ($) 1 1 882.3783 2 1.5 1323.567 3 2.25 1985.351 4 3.375 2978.027 5 5.0625 4467.04 6 7.59375 6700.56 7 11.39063 10050.84 8 17.08594 15076.26 9 25.62891 22614.39 10 38.44336 33921.59 113.3301
double dec dep 40000.00 32000.00 25600.00 Double declining balance method: d = 2 * (1/n) * remaining cost In 2020 : 2* (1/10) * 200000 In 2021: 2* (1/10) * (200000-40000) . . In 2030
Sum of years digits method i = ( #$%0/. $%+1&2% .&0% +%3*&"&"4 $/3 -0 )%*+$ ) * (Vo-Vs) sum of years 18181.82 16363.64 14545.45 12727.27 10909.09 9090.91 7272.73 5454.55 3636.36 1818.18 x year 1 10 year 2 9 year 3 8 year 4 7 Year 5 6 year 6 5 year 7 4 year 8 3 year 9 2 year 10 1 Summation 55
section 7 modified-2.pdf

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section 7 modified-2.pdf

  • 1. Economics of Chemical Plants Eng. Kareem H. Mokhtar
  • 2. Depreciation Straight line method D= ! " * ( ) Use or production method d= ( #$% &" '(% )%*+ ,-'*. /$% ) ( ) Double declining balance method: d = 2 * (1/n) * remaining cost Sum of years digits method i = ( #$%0/. $%+1&2% .&0% +%3*&"&"4 $/3 -0 )%*+$ ) * (Vo-Vs)
  • 3. Question 1 A 2020 car costs 200,000 L.E, if you will buy this car and sell it at 2030 with expected price of 100,000 L.E. you predict that you will be using it each year 1.5 times more than the previous year with total of 200,000 Km. Calculate the depreciation using 1- straight line method 2- use or production method 3- Double declining method 3- sum of years digits
  • 4. Straight line method D= ! " * ( ) D = (1/10) * (200000-100000) = 10000 $ each year use or production method d= ( #$% &" '(% )%*+ ,-'*. /$% ) ( ) Year Use 2020 x 2021 1.5x 2022 1.5*1.5x : : 2030 ..
  • 5. year Use (f(x)) Dep ($) 1 1 882.3783 2 1.5 1323.567 3 2.25 1985.351 4 3.375 2978.027 5 5.0625 4467.04 6 7.59375 6700.56 7 11.39063 10050.84 8 17.08594 15076.26 9 25.62891 22614.39 10 38.44336 33921.59 113.3301
  • 6. double dec dep 40000.00 32000.00 25600.00 Double declining balance method: d = 2 * (1/n) * remaining cost In 2020 : 2* (1/10) * 200000 In 2021: 2* (1/10) * (200000-40000) . . In 2030
  • 7. Sum of years digits method i = ( #$%0/. $%+1&2% .&0% +%3*&"&"4 $/3 -0 )%*+$ ) * (Vo-Vs) sum of years 18181.82 16363.64 14545.45 12727.27 10909.09 9090.91 7272.73 5454.55 3636.36 1818.18 x year 1 10 year 2 9 year 3 8 year 4 7 Year 5 6 year 6 5 year 7 4 year 8 3 year 9 2 year 10 1 Summation 55