Anslaw Electronics purchased packaging equipment for $600,000 cash on July 1, 2014. Management estimates the equipment can package 800,000 inventory units and will be productive for 5 years. Its salvage value is estimated at $50,000. During 2014, the equipment packaged 130,000 units, with another 140,000 units in 2014. Instructions: Compute the annual depreciation expense for 2014 and 2015, and book value at December 31, 2015, under the straight-line method. 2014 depreciation = $___ 2015 depreciation = $___ December 31, 2015 book value = $___
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.
Anslaw Electronics purchased packaging equipment for $600,000 cash on July 1, 2014. Management estimates the equipment can package 800,000 inventory units and will be productive for 5 years. Its salvage value is estimated at $50,000. During 2014, the equipment packaged 130,000 units, with another 140,000 units in 2014.
Instructions: Compute the annual
2014 depreciation = $___
2015 depreciation = $___
December 31, 2015 book value = $___
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