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You can read the details below. By accepting, you agree to the updated privacy policy. Thank you! View updated privacy policy We've encountered a problem, please try again.  Engineering Economy Depreciation Depreciation This module deals with depreciation and the different methods of solving depreciation charges. At the end of this module, the learner should be able to: 1.Calculate the depreciation charge for any particular year using the different methods. 2.Compute for the book value for any particular year using any depreciation method. Definition of Terms 1.Depreciation – is the decrease in the value of physical property with the passage of time. 2. Value – present worth of all future profits that are to be received through ownership of a particular property. 3.Market Value- the amount which a willing buyer will pay to willing seller for the property each has equal advantage and is under no compulsion to buy or sell. 4.Utility/Use Value – is what the property is worth to the owner as an operating unit. 5.Fair Value- is the value which is usually determined by a disinterested third party in order to establish a price that is fair to both seller and buyer. 6. Book Value – sometimes called depreciated book value, it is worth of a property as shown on the accounting records of an enterprise. 7.Salvage or Resale Value- is the price that can be obtained from the sale of the property after it has been used. 8.Scrap Value- is the amount of property would sell for if disposed off as junk. 9.Straight Line Method – this method assumes that the loss in value is directly proportional to the age of property. 10. Sinking Fund Method – this method assumes that a sinking fund is established in which funds will accumulate for replacement. 11. Declining Balance method (Matheson Formula) – also called the constant percentage method – it is assumed that the annual cost of depreciation is a fixed percentage of the salvage value of the beginning of the year. Which is NOT an essential element of an ordinary annuity ? A. The amounts of all payments are equal. B. The payments are made at equal interval of time. C. The first payment is made at the beginning of the first period. D. Compound interest is paid on all amounts in the annuity. Engineering Economy Mcqs
Q. In what method of computing depreciation where it assumes that the loss in value is directly proportional to the age of the equipment or asset ? a. Straight line method b. Sinking fund method c. Sum-of-year digit method d. Declining balance method
In what method of computing depreciation where it assumes that the loss in value is directly proportional to the age of the equipment or assets?The Straight Line Method : States that the loss in value is considered to be directly proportional to the age of the assets.
Is the decrease in value of physical properties with the passage of time and use?Depreciation is defined as decrease in the value of a physical property or asset with the passage of time.
In what method of computing depreciation where it assumes that a sinking fund is established in which funds will accumulate for replacement purposes?Sinking fund method is a method of calculating depreciation for an asset in which apart from calculating depreciation, it also keeps aside a fund for replacing the asset at the end of its useful life. This method is used when the assets that need to be replaced are of high cost.
Which of the following is due to the decrease in the value of a property due to the gradual extraction of its contents?Depletion refers to the decrease in the value of a property due to the gradual extraction of its contents.
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This method assumes that the loss in value is directly proportional to the age of the property
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