Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 2

Exactly 10 years ago, Boyditch Professional Associates purchased $100,000 in depreciable assets with an estimated salvage of $10,000. For tax depreciation, the SL method with n =10 years was used, but for book depreciation, Boyditch applied the DDB method with n = 7 years and neglected the salvage estimate. The company sold the assets today for $12,500.
a) Compare the sales price today with the book values using the SL and DDB methods.
b) If the salvage of $12,500 had been estimated exactly 10 years ago, determine the depreciation for each method in year 10.