Student Center
 Glossary Web Links Solving FE Problems Choose a ChapterChapter 1Chapter 2Chapter 3Chapter 4Chapter 5Chapter 6Chapter 7Chapter 8Chapter 9Chapter 10Chapter 11Chapter 12Chapter 13Chapter 14Chapter 15Chapter 16Chapter 17Chapter 18Chapter 19 Learning Objectives Chapter Overview Spreadsheet Exercise #12 Chapter Review T/F Quiz Matching Quiz FE Exam Prep Quiz FeedbackHelp Center

Engineering Economy, 5/e

Depreciation Methods

# Sample FE Exam Problems

How to use this section: This section includes questions and problems like those on a typical FE exam. For organization purposes only, they are presented in chapter order of the text Engineering Economy, 5th edition, by Blank and Tarquin.

It is recommended that you read through each question carefully.

 1 A machine with a five-year life has a first cost of \$20,000 and \$2,000 salvage value. Its annual operating cost is \$8,000 per year. According to the straight line method, the depreciation charge in year 2 is nearest to: A) \$3,600 B) \$4,000 C) \$11,600 D) \$12,000 2 A depreciable asset with a three-year life has a first cost of \$30,000 with a \$6,000 salvage value. The machine's operating cost is \$10,000 in year one, \$12,000 in year two and \$14,000 in year three. According to the straight line method, the depreciation charge in year 2 is closest to: A) \$8,000 B) \$10,000 C) \$20,000 D) \$22,000 3 A machine with a 10-year life is to be depreciated by the MACRS method. The machine has a first cost of \$30,000 with a \$5,000 salvage value. Its annual operating cost is \$7,000 per year. The depreciation charge in year three is nearest to: A) \$3,600 B) \$4,320 C) \$5,860 D) \$7,120 4 A used machine, which had a initial cost of \$70,000, was purchased by Company A for \$50,000. The company expects to depreciate the machine over a five-year period and then sell it for \$10,000. According to the straight line method, the depreciation charge in year two is nearest: A) \$8000 B) \$10,000 C) \$12,000 D) \$14,000 5 An asset with a first cost of \$50,000 is to be depreciated by the straight-line method over a five year period. The asset will have annual operating costs of \$20,000 and a salvage value of \$10,000. According to the straight line method, the book value at the end of year 3 will be closest to: A) \$8,000 B) \$20,000 C) \$24,000 D) \$26,000 6 An asset with a first cost of \$50,000 is depreciated by the MACRS method over a five-year period. If the asset will have a \$20,000 salvage value, its book value at the end of year two will be closest to: A) \$10,000 B) \$16,000 C) \$24,000 D) \$30,000 7 An asset with a first cost of \$50,000 is depreciated by the straight-line method over its five year life. Its annual operating cost is \$20,000 and its salvage value is expected to be \$10,000. The book value at the end of year five will be neares to: A) zero B) \$8,000 C) \$10,000 D) \$14,000 8 An asset with a first cost of \$30,000 has been depreciated by the straight line method at \$4,000 per year. If the asset's depreciable life was five years, the salvage value used in calculating the depreciation was closest to: A) \$4,000 B) \$5,000 C) \$8,000 D) \$10,000 9 An asset, which had a first cost of \$50,000 and an estimated salvage value of \$10,000, was depreciated by the MACRS method. If the depreciation charge in year two was \$16,000, the recovery period of the asset was: A) 3 years B) 5 years C) 7 years D) 10 years 10 An asset, which had a first cost of \$50,000 and an estimated salvage value of \$10,000, was depreciated by the MACRS method. If its book value at the end of year three was \$21,850 and its market value was \$25,850, the amount of depreciation charged against the asset up to that time was closest to: A) \$18,850 B) \$21,850 C) \$25,850 D) \$28,150