00:01
So we basically going to be looking at three methods of calculating depreciation.
00:08
Obviously, decrease in the value of a machine or piece of equipment or a fixed asset over its useful life.
00:20
Use usage.
00:23
Okay, so the first aspect, we're just going to partition this so we can identify with the first method, which is the sum of fear method and the other one is going to be the double declining method and the other one is basically known as the modified accelerated cost recovery system.
00:49
Okay, so in the sum of year, given the information that the piece of equipment is worth 80 ,000, that's the cost price and there's the salvage value of 10 ,000 is expected.
01:03
Depth useful life for seven years.
01:05
So according to the sum of your method, the depreciation is basically given by a formula, the life times life plus one, right, divided by two.
01:22
So we get seven times seven plus one, which is basically eight, divided by two, that will give you an answer of 20.
01:35
Okay, so what you then do, you then look at the 28 being a fraction, i mean the depreciation in the fourth year being a fraction of that life times life plus one divided by two, which is 28, sorry, not 25 in this.
02:01
So 28 times the value of the data.
02:06
Equipment, less the salvage value of 10 ,000.
02:12
Okay, so that basically gives us depreciation in the 40 of 10 ,000 dollars.
02:19
Right...