cars, Company sed three ma turnover in the accounting department, a different accountant was in charge of selecting the depreciation method for each machine, and each selected a different method. Infor- mation concerning the machines is summarized below. Machine Acquired Cost 1 1/1/12 2 1/1/13 3 11/1/15 Salvage Useful Life in Years Value $105,000 $5,000 180,000 10,000 125,000 15,000 10 8 6 Depreciation Method Straight-line Declining-balance Units-of-activity For the declining-balance method, the company uses the double-declining rate. For the units-of-activity method, total machine hours are expected to be 25,000. Actual hours of use in the first 3 years were 2015, 2,000; 2016, 4,500; and 2017, 5,500. Instructions (a) Compute the amount of accumulated depreciation on each machine at December 31, 2015. (b) If Machine 2 had been purchased on May 1 instead of January 1, what would be the depreciation expense for this machine in (1) 2013 and (2) 2014?
cars, Company sed three ma turnover in the accounting department, a different accountant was in charge of selecting the depreciation method for each machine, and each selected a different method. Infor- mation concerning the machines is summarized below. Machine Acquired Cost 1 1/1/12 2 1/1/13 3 11/1/15 Salvage Useful Life in Years Value $105,000 $5,000 180,000 10,000 125,000 15,000 10 8 6 Depreciation Method Straight-line Declining-balance Units-of-activity For the declining-balance method, the company uses the double-declining rate. For the units-of-activity method, total machine hours are expected to be 25,000. Actual hours of use in the first 3 years were 2015, 2,000; 2016, 4,500; and 2017, 5,500. Instructions (a) Compute the amount of accumulated depreciation on each machine at December 31, 2015. (b) If Machine 2 had been purchased on May 1 instead of January 1, what would be the depreciation expense for this machine in (1) 2013 and (2) 2014?
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:In recent years, Darnell Company purchased three machines. Because of heavy
turnover in the accounting department, a different accountant was in charge of selecting
the depreciation method for each machine, and each selected a different method. Infor-
mation concerning the machines is summarized below.
Machine Acquired
1
1/1/12
1/1/13
11/1/15
Salvage Useful Life
Value in Years
Cost
$105,000 $5,000
180,000
10,000
125,000
15,000
10
8
6
Depreciation
Method
Straight-line
Declining-balance
Units-of-activity
For the declining-balance method, the company uses the double-declining rate. For the
units-of-activity method, total machine hours are expected to be 25,000. Actual hours of
use in the first 3 years were 2015, 2,000; 2016, 4,500; and 2017, 5,500.
Instructions
(a) Compute the amount of accumulated depreciation on each machine at December 31,
2015.
(b) If Machine 2 had been purchased on May 1 instead of January 1, what would be the
depreciation expense for this machine in (1) 2013 and (2) 2014?
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Step 1: Explanation of Depreciation
VIEWStep 2: Computation of accumulated depreciation of 1st machine at 31st December 2015
VIEWStep 3: Computation of Depreciation expense for machinery 2 under double-declining-balance method
VIEWStep 4: Computation of Depreciation expense for machinery 3 under units-of-production method
VIEWStep 5: Machine 2 Depreciation
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