00:01
We're going to be looking at a piece of machine, the depreciation of a piece of a machinery that is bought for $9 ,000 ,800, $9 ,800 on the 1st of may.
00:19
So we just want to compare depreciation over the period of its useful life.
00:25
And its useful life is given as three years.
00:33
There's three years and it does have a salvage value and the salvage value is given as $5 ,400.
00:44
Now with this information, we want to find out what depreciation is charged in those three years of its useful life.
00:56
So we're going to compare two methods according to the question here.
01:02
The first method is obviously going to be the straight line method.
01:05
And the other method is the double decline method.
01:12
If you could just put dd there for short.
01:17
So we want to look at what the depreciation is in year one, what the depreciation is in year two, and what the depreciation is in year three, and possibly just look at the closing balances or the book values, but that's not important at the stage.
01:39
We want to look at the year one.
01:43
According to the straight line depreciation, obviously we can simply calculate this based on the information regarding the cost price of the piece of equipment, so the cost price minus, the cost price is given about the, we've already indicated that the cost price is 91 ,800 less the salvage value.
02:12
So the cost price, which is 9 to 1 ,000 less the salvage value, and divided by the number of years is going to basically give us the depreciation.
02:32
So our dpn is actually going to be a result of that calculation.
02:38
So if we do that, you find that 9 to 1 ,800 less the salvage value of 4 ,500, divide that amount by the number of years, three years.
02:50
You're going to find a depreciation rate of a depreciation value rather of $28 ,800.
03:00
So this is going to be the value.
03:02
Throughout the useful life of those pieces of equipment.
03:10
28 ,800.
03:12
Now, when it comes to the double decline method, the story is a bit different because when we look at the depreciation, you can actually have a formula to say two times the cost of asset and divided by the rate.
03:32
And the depreciation rate in this particular case or divided by the useful life...