A cooling-water pumping station at the LCRA plant costs $600,000 to construct, and it is projected to

Question:

A cooling-water pumping station at the LCRA plant costs $600,000 to construct, and it is projected to have a 25-year life with an estimated salvage value of 15% of the construction cost. However, the station will be book-depreciated to zero over a recovery period of 30 years. Calculate the annual depreciation charge for years 4, 10, and 25, using

(a) Straight line depreciation

(b) DDB depreciation.

(d) Use a spreadsheet to build the depreciation and book value schedules for both methods to verify your answers.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...