A purchased machine cost $320,000, with delivery and installation charges amounting to $30,000. The declared salvage value was $50,000. Its useful life is 10 years. a) Compute the SL depreciation schedule over its useful life. b) Compute the DDB depreciation schedule over its useful life. c) Compute the MACRS depreciation schedule. Its ADR life is 12 years
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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A purchased machine cost $320,000, with delivery and installation charges amounting to $30,000.
The declared salvage value was $50,000.
Its useful life is 10 years.
a) Compute the SL
b) Compute the DDB depreciation schedule over its useful life.
c) Compute the MACRS depreciation schedule. Its ADR life is 12 years.
d) Early in Year 4, the company changed its product mix and found that it no longer needed the machine.
One of its competitors agreed to buy the machine for $110,000.
Determine the loss, gain, or recapture on the sale. Use the MACRS schedule
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