1. 1 Press Ctrl-A ©G Dear 2011 – Not to be sold/Free to use Depreciation Straight Line Stage 6 - Year 11 Applied Mathematic (Preliminary General 1)

2. 2 Modeling Depreciation (1/6) Assets include things such as automobiles, computers, furniture, house and equipment.Assets include things such as automobiles, computers, furniture, house and equipment. The only asset that rarely declines in value is land.The only asset that rarely declines in value is land. The definition of depreciation is “the decline in the useful life of a fixed asset over time”.The definition of depreciation is “the decline in the useful life of a fixed asset over time”. Press You Tube Video These assets have a set amount of useful life. This means that an asset is not expected to last forever, and so its value depreciates over time.These assets have a set amount of useful life. This means that an asset is not expected to last forever, and so its value depreciates over time.

3. 3 The 2 main types of depreciation. a) Straight line depreciation. $ $ It loses a constant amount each period. b) Declining Balance depreciation. It loses a varying amount each period. An exponential curve. Decay Modeling Depreciation (2/6)

4. 4 Great Wall V240 Super Luxury K2 2010 Depreciation Tables (2/6) $23,990 The vehicle is depreciated at $3,000 per year. It will be sold when its value falls below $7,000. When ??? Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 $23,990 -$3,000 $20,990 -$3,000 $17,990 -$3,000 $14,990 -$3,000 $11,990 -$3,000 $8,990 -$3,000 $5,990 After 6 Years

5. 5 $ Value of asset declines by a constant amount each year. Salvage Value: S = V 0 - Dn S = Salvage ValueV 0 = Purchase price D = Annual Depreciationn = Number of Periods Press You Tube Video Modeling Depreciation (3/6)

6. 6 A boat is bought for $30 000 and depreciates at $1,500/annum. Calculate the salvage value after 7 years. S = V 0 - Dn S =S =30 000- 1 500x 7 = $ 19 500 Purchase PriceAnnual DepreciationNumber of periods Modeling Depreciation (5/6)

7. 7 A plane is bought for $300 000 and depreciates at $25 000/annum. If it is replaced when the salvage value is $100,000, how long till it is replaced? S = V 0 - Dn 100 000 = Salvage Value 300 000 Purchase Price - 25 000 Annual Depreciation n Number of periods +25000n 100 000+25000n = 300 000 -100000 25000n = 200 000 ÷25000 n = 8years Modeling Depreciation (6/6)