ABC Company purchased equipment on May 1, 2021 costing $1,000,000. Its estimated salvage value is $90,000 and its expected life is eight years. Estimated total units of activity is 200,000 hours. Instructions: Calculate the depreciation expense (to the nearest dollar) by each of the following methods, SHOWING ALL CALCULATIONS. (a) Straight-line for 2021, 2022 (b) Double-declining balance for 2021, 2022, 2023
ABC Company purchased equipment on May 1, 2021 costing $1,000,000. Its estimated salvage value is $90,000 and its expected life is eight years. Estimated total units of activity is 200,000 hours. Instructions: Calculate the depreciation expense (to the nearest dollar) by each of the following methods, SHOWING ALL CALCULATIONS. (a) Straight-line for 2021, 2022 (b) Double-declining balance for 2021, 2022, 2023
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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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Transcribed Image Text:ABC Company purchased equipment on May 1, 2021 costing $1,000,000. Its estimated salvage value is $90,000 and its
expected life is eight years. Estimated total units of activity is 200,000 hours.
Instructions:
Calculate the depreciation expense (to the nearest dollar) by each of the following methods, SHOWING ALL
CALCULATIONS.
(a) Straight-line for 2021, 2022
(b) Double-declining balance for 2021, 2022, 2023
(c) Sum-of-the-years'-digits for 2021, 2022,2023
(d) Units of activity method, assuming 12,000 hours in 2021 and 27,000 hours in 2022
(e) Record the entry for depreciation in 2021, assuming the straight line method is used
(f) calculate the book value of the asset at 12/31/22, assuming the straight line method is used
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