ABC Company bought manufacturing equipment on March 1 for $330,000. The manufacturing equipment is expected to last 3 years or 22,000 operating hours, and a residual value of $6,000. The manufacturing equipment is used for 8,500 hours during Year 1, 6,500 hours in Year 2, 5,000 hours in Year 3, and 1,600 hours in Year 4. Instructions: Determine the amount of depreciation expense for the years ended December 31, Year 1, Year 2, Year 3, and Year 4, by (a) the straight-line method, (b) the units-of-activity method {round the rate to nearest cent and depreciation expense to nearest dollar}, and (c) the double-declining-balance method {do not round intermediate calculations}.
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.
ABC Company bought manufacturing equipment on March 1 for $330,000. The manufacturing
equipment is expected to last 3 years or 22,000 operating hours, and a residual value of $6,000. The
manufacturing equipment is used for 8,500 hours during Year 1, 6,500 hours in Year 2, 5,000 hours in
Year 3, and 1,600 hours in Year 4.
Instructions:
Determine the amount of
3, and Year 4, by (a) the straight-line method, (b) the units-of-activity method {round the rate to
nearest cent and depreciation expense to nearest dollar}, and (c) the double-declining-balance method
{do not round intermediate calculations}.
Depreciation is the accounting techniques which is used to define the actual value of assets has been used by the company in the books of accounts it record the loss value of a tangible assets due to its use or obstacles.
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