A company purchased machinery for $ 200,000 on 1st January . It has an estimated useful life of 10 years and an estimated salvage value of $ 20,000 . The firm sells the asset at the salvage value at the end of the 10th year . The machine has an expected production of 15000 units during its useful life . Now the production pattern is as follows : Year Production 1-3 2000 units per year 4-7 1500 units per year 8-10 1000 units per year Answer the following questions using the Units of Production Method .
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.
A company purchased machinery for $ 200,000 on 1st January . It has an estimated useful life of 10 years and an estimated salvage value of $ 20,000 . The firm sells the asset at the salvage value at the end of the 10th year . The machine has an expected production of 15000 units during its useful life . Now the production pattern is as follows : Year Production 1-3 2000 units per year 4-7 1500 units per year 8-10 1000 units per year Answer the following questions using the
a . What is the BV at year - 3 ?
b . What is the BV at year - 10 ?
c . What is the cumulative
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