# An asset for drilling was purchased and placed in service by a petroleum production company. It...

## Question:

An asset for drilling was purchased and placed in service by a petroleum production company. It costs $55,000 with a trade-in of the old unit which is valued at$5,000. The new asset has an estimated MV (market value) of \$12,000 at the end of the estimated useful life of 14 years.

Compute the depreciation amount in the 3rd and 8th year, and the BV at the end of the 5th and 10th year of life by each of these methods.

a. SL method

b. 200% DB method with switchover to SL

c. The GDS

## Accounting Management:

It is a managerial tool that uses information such as accountant's data and analyses for decision making. It helps in conducting business cost minimization by preparing reports and records which assists in management and performance of control functions.

a) Using SL (Straight line) method:

Calculation of depreciation,

Formula:

{eq}\begin{align*}{} {\rm{Dep}} &= \dfrac{{{\rm{Original \;cost -...

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