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138 Section 13: Investment Analysis
File name: hp 12c_user's guide_English_HDPMBF12E44 Page: 138 of 209
Printered Date: 2005/7/29 Dimension: 14.8 cm x 21 cm
Note: If the number of months in the first calendar year is less than 12, the
amount of depreciation in the 1st year will be less than a full year’s
depreciation. The actual number of years that depreciation will occur is
equal to the life +1. For example, a drill has a life of 3 years and is
purchased 3 months before the year end. The following time diagram shows
that depreciation will occur over 4 calendar years.
Example 1:
A property has just been purchased for $150,000. The purchase
price is allocated between $25,000 for land and $125,000 for improvements
(building). The remaining useful life of the building is agreed to be 25 years. There
is no salvage value forecasted at the end of the useful life of the building. Thus, the
depreciable value and book value is $125,000.
The building was acquired 4 months before the end of the year. Using straight-line
depreciation, find the amount of depreciation and remaining depreciable value for
the 1st, 2nd, 25th, and 26th years. What is the total depreciation after 3 years
?
Keystrokes Display
fCLEARG
Salvage value = 0 so FV = 0.
125000$
125,000.00
Book value.
25n
25.00
Life.
1\
1.00
Year desired.
4t
~
1.00
1,666.67
123,333.33
First year:
depreciation,
remaining depreciable value.
t
~
2.00
5,000.00
118,333.33
Second year:
depreciation,
remaining depreciable value.
t
3.00
5,000.00
Third year:
depreciation.
~:$:3
+~-
gi00
11,666.67
Total depreciation through third
year.
fCLEARG
11,666.67
125000$
125,000.00
Book value.