5,000 hours in year 1 and 7,000 hours in year 2. Repair costs were $520 in $10,150 and was expected to last 5 years, with a residual value of $770. The for ast six years, with a residual value of $2,340. 5 lining balance depreciation expense for years 1 and 2 for the forklift. TIP: Remem
5,000 hours in year 1 and 7,000 hours in year 2. Repair costs were $520 in $10,150 and was expected to last 5 years, with a residual value of $770. The for ast six years, with a residual value of $2,340. 5 lining balance depreciation expense for years 1 and 2 for the forklift. TIP: Remem
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
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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Transcribed Image Text:At the beginning of the year, Phantom Industries bought machinery, shelving, and a forklift. The machinery initially cost
$32,400 but had to be overhauled (at a cost of $2,560) before it could be installed (at a cost of $1,280) and finally put into
use. The machinery's total life was estimated as 40,000 hours, with an estimated residual value of $1,000. The machinery
was actually used 5,000 hours in year 1 and 7,000 hours in year 2. Repair costs were $520 in each year.
The shelving cost $10,150 and was expected to last 5 years, with a residual value of $770. The forklift cost $18,450 and
was expected to last six years, with a residual value of $2,340.
CP9-1 (Algo) Part 5
5. Compute double-declining-balance depreciation expense for years 1 and 2 for the forklift. TIP: Remember that the formula for
double-declining-balance uses cost minus accumulated depreciation (not residual value).
Double-declining-balance
Year 11
Year 2
Transcribed Image Text:At the beginning of the year, Phantom Industries bought machinery, shelving, and a forklift. The machinery initially cost
$32,400 but had to be overhauled (at a cost of $2,560) before it could be installed (at a cost of $1,280) and finally put into
use. The machinery's total life was estimated as 40,000 hours, with an estimated residual value of $1,000. The machinery
was actually used 5,000 hours in year 1 and 7,000 hours in year 2. Repair costs were $520 in each year.
The shelving cost $10,150 and was expected to last 5 years, with a residual value of $770. The forklift cost $18,450 and
was expected to last six years, with a residual value of $2,340.
CP9-1 (Algo) Part 6
6. Prepare the journal entry to record double-declining balance depreciation expense for the forklift for year 2. (If no entry is required
for a transaction/event, select "No Journal Entry Required" in the first account field.)
View transaction list
Journal entry worksheet
Record the double-declining balance depreciation expense for the forklift for
year 2.
Note: Enter debits before credits.
Transaction
General Journal
Debit
Credit
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