Problem with deriving the proper PP&E schedule

Water Cooler
#1

I need help deriving the proper PP&E schedule given the following information on.

(1) At the beginning of the year 2020, the company invests 100.000 in PP&E.
(2) Capital Expenditure Assumptions are the following: Asset Salvage Value (% of Capital Addition) is 15% and Asset Useful Life is 10 years.

This means depreciation for 2020 is (100.000-0,15*100.000)/10=8.500. So far so good.

Now assuming that in the following years the company has CAPEX of 20.000 each year. What is the depreciation in 2021 and the following years?

My conceptual problem is (given the assumption (2)), is depreciation always related to the initial investment or is it “updated” taking the yearly CAPEX into account?

Thanks a lot for your help!

#2

Depreciation is updated every year. The depreciation on Year 1 capex would be an additional $850.

#3

Hi Chad thanks a lot for your response. But please could you elaborate your answer briefly?

I got a hint that one has to basically use every capex like adding a new asset and derive the depreciation accordingly. I.e. as capex in 2021 is 20.000, I thought additional depreciation should be 1.700=(20.000-0,15*20.000)/10. Overall depreciation for 2021 would be 8.500+1.700.

Thanks!

#4

For some reason I was thinking the annual capex was $10,000. After re-reading your question I see that you listed it as $20,000 so your $1,750 is the correct value.