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5 cards from this section. Quick, good the night before a test.
What is the difference between ownership costs and operating costs?
Think about costs that occur whether you are using equipment or not.
What expenses might be considered as initial costs?
Consider everything required to make the equipment ready for use.
What is included in ownership costs?
Think about the ongoing costs incurred without active use of the equipment.
True or False: Operating costs are incurred only when the equipment is used.
Recall what is considered a cost due to usage.
An equipment costs $150,000, has a salvage value of $15,000, and a useful life of 5 years. Calculate annual depreciation using the straight-line method and explain how this amounts contribute to ownership costs.
Break down the formula and plug in the values carefully.
If a contractor purchases a piece of equipment at $120,000, later expects it to sell for $20,000 and estimates a useful life of 8 years, what would be the annual depreciation using the double declining balance method for the first year?
Remember to consider that the double declining method applies to the entire initial cost, not the salvage value.
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