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Question: 1) A project requires the purchase of new equipment at a cost of $18,000, which will be depreciated over the life of the asset. A further $5000 spent on transport and installation will be added to the purchase price of the equipment for depreciation purposes, and $1000 will be spent on advertising and other operating expenditure to get the project up and running. What is the value of the asset for depreciation purposes?
2) A project will increase revenue from $1.9 million to $2.6 million. Wages are 50% of revenue. Maintenance on the machine will be $25,000 less than it is on the machine that will be replaced. What is the incremental revenue that will result from accepting this project? (Hint: This is tricky. Read the question carefully to be sure you understand exactly what this question is asking for.)
3) A machine with a purchase price of $11,000 is to be depreciated over its useful working life of 6 years to a book value of zero, using straight-line depreciation. What is the book value of the machine after 3 years?
4) A machine with a purchase price of $6,000 is to be depreciated over its useful working life of 10 years to a book value of zero, using diminishing value depreciation. What is the amount of depreciation in Year 1?
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