. On May 1, the company XYZ bought a machine that cost 252,000 in order to use for day-to-day operation. The machine is expected to have 4 years of useful life with a salvage value of 65,000. Due to the nature of the machine, the company decides to use the sum of years’ digits depreciation method to allocate the cost of the machine over its useful life. Calculate the sum of years’ digits depreciation for each year of the fixed asset above.
. On May 1, the company XYZ bought a machine that cost 252,000 in order to use for day-to-day operation. The machine is expected to have 4 years of useful life with a salvage value of 65,000. Due to the nature of the machine, the company decides to use the sum of years’ digits depreciation method to allocate the cost of the machine over its useful life. Calculate the sum of years’ digits depreciation for each year of the fixed asset above.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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3. On May 1, the company XYZ bought a machine that cost 252,000 in order to use for day-to-day operation. The machine is expected to have 4 years of useful life with a salvage value of 65,000. Due to the nature of the machine, the company decides to use the sum of years’ digits depreciation method to allocate the cost of the machine over its useful life.
Calculate the sum of years’ digits depreciation for each year of the fixed asset above.
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