9-10. On January 2, 2020, a new machine was acquired for 400,000. The machine has estimated salvage value of 40,000 and an estimated useful life of 10 years. The machine is expected to produce a total of 800,000 units and work for 50,000 hours throughout its useful life. The company used the machinery for 3,000 hours in 2020 and 5,000 hours in 2021. The machinery produced 50,000 units in 2020 and 80,000 units in 2021.
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.
9. Compute for the
a. 40,000 c. 72,000
b. 36,000 d. 80,000
10. How much is the book value of the equipment as of end of second year using output method of
depreciation?
a. 360,000 c. 301,500
b. 341,500 d. 230,000
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