Calculate the Machine yearly DEPRECIATION.

Question

The Company bought a Fixed Asset (Machine) with purchasing price of EGP 2,500,000.-. Added expenses the company spent on customs, taxes, and employers training sessions of totally EGP 2,000,000. The expected salvage value is 1,000,000., and the expected asset life is 5 years. Calculate the Machine yearly DEPRECIATION.

Answer 1

Given:

Asset Purchase Price: EGP 2,500,000

Salvage Value: 1,000,000

Expected Life of Asset: 5 Years

Solve:

The Salvage value is the estimated value of the asset (Machine in this case) at the end of it's useful life.

For simplicity, let's say the company uses straight-line depreciation for its machinery. The purchase price is 2,500,000 and it has an expected life expectancy of 5 years (Remember that at the end of its useful life the equipment will have a salvage value of 1,000,000. Therefore, we will depreciate the equipment 300,000 per year (1,500,000/5) -->1,500,000 = Purchase price minus salvage value. .

Year 1 Depreciation:300,000 Equipment value: 2,200,000

Year 2 Depreciation:300,000 Equipment value:1,900,000

Year 3 Depreciation:300,000 Equipment value:1,600,000

Year 4 Depreciation:300,000 Equipment value:1,300,000

Year 5 Depreciation:300,000 Equipment value: 1,000,000

Year 1 Depreciation Equipment value: