Alpine Inc. purchased equipment on January 1 of Year 1 with a cost of $180,000. The estimated residual value at the end of its estimated useful life of 6 years is $8,000. Data relating to the equipment follow. Estimated service life, in years 6 Estimated service hours 80,000 Actual service hours in Year 1 16,000 Actual service hours in Year 2 14,400 Required Compute depreciation expense for Year 1 and Year 2 assuming (1) straight-line, (2) sum-of-the-years’- digits, (3) double-declining-balance, and (4) units-of-production depreciation methods. ● Note: Do not round any rates used in your calculations; round your final answers to the nearest whole dollar. Straight-line Sum-of-the-years’- digits Double-declining-balance Units-of-production Year 1 Year 2 Please do not provide answer in image format. thank you.
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.
Alpine Inc. purchased equipment on January 1 of Year 1 with a cost of $180,000. The estimated residual value at the end of its estimated useful life of 6 years is $8,000. Data relating to the equipment follow.
| Estimated service life, in years | 6 |
| Estimated service hours | 80,000 |
| Actual service hours in Year 1 | 16,000 |
| Actual service hours in Year 2 | 14,400 |
Required
Compute depreciation expense for Year 1 and Year 2 assuming (1) straight-line, (2) sum-of-the-years’- digits, (3) double-declining-balance, and (4)
● Note: Do not round any rates used in your calculations; round your final answers to the nearest whole dollar.
| Straight-line | Sum-of-the-years’- digits | Double-declining-balance | Units-of-production | Year 1 | Year 2 |
|---|
Please do not provide answer in image format. thank you.
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