At the beginning of last year, Bratworth Corporation purchased a piece of heavyequipment for $99,000. The equipment has a life of five years or 100,000 hours. The estimatedresidual value is $9,000. Bratworth used the equipment for 21,000 hours last year and 27,000hours this year. Depreciation expense for year two using double-declining-balance (DDB) andunits-of-production methods would be as follows:DDB UOPa. $23,760 $26,730b. $21,600 $26,730c. $21,600 $24,300d. $23,760 $24,300
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.
At the beginning of last year, Bratworth Corporation purchased a piece of heavy
equipment for $99,000. The equipment has a life of five years or 100,000 hours. The estimated
residual value is $9,000. Bratworth used the equipment for 21,000 hours last year and 27,000
hours this year.
units-of-production methods would be as follows:
DDB UOP
a. $23,760 $26,730
b. $21,600 $26,730
c. $21,600 $24,300
d. $23,760 $24,300
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