A machine with a cost of $120,000 has an estimated residual value of $15,000 and an estimated life of five years or 15,000 hours. It is to be depreciated by the units-of-activity method. What is the amount of depreciation for the second full year, during which the machine was used 5,000 hours? a. $5,000 b. $35,000 c. $21,000 d. $45,000
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 machine with a cost of $120,000 has an estimated residual value of $15,000 and an estimated life of five years or
15,000 hours. It is to be
full year, during which the machine was used 5,000 hours?
a. $5,000
b. $35,000
c. $21,000
d. $45,000
2. Equipment with a cost of $220,000 has an estimated residual value of $30,000 and an estimated life of 10 years or
19,000 hours. It is to be depreciated by the straight-line method. What is the amount of depreciation for the first full year,
during which the equipment was used 2,100 hours?
a. $19,000
b. $21,000
c. $22,000
d. $30,000
3. A machine with a cost of $75,000 has an estimated residual value of $5,000 and an estimated life of four years or
18,000 hours. What is the amount of depreciation for the second full year, using the double-declining-balance method?
a. $17,500
b. $37,500
c. $18,750
d. $16,667
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