Case B On April 1, 2021, Robert Sporting Goods Company purchased some new machinery for $3 300 000 to expand its manufacturing capacity. The machinery had an estimated useful life of five years with residual value of $300 000. Depreciation is computed by the sum of the years' digits method. The company’s financial year ends December 31. Required: What amount should be recorded as machinery depreciation for the year ended December 31, 2021 and 2022 respectively? Complete the schedule provided below. Sum of the years' digits factor Answer Depreciable base $Answer April 1, 2021 to March 31, 2022 Depreciation expense $Answer April 1, 2022 to March 31, 2023 Depreciation expense $Answer Depreciation expense for year ended December 31, 2021 $Answer Depreciation expense for year ended December 31, 2022 $Answer
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.
Case B
On April 1, 2021, Robert Sporting Goods Company purchased some new machinery for $3 300 000 to expand its manufacturing capacity. The machinery had an estimated useful life of five years with residual value of $300 000. Depreciation is computed by the sum of the years' digits method. The company’s financial year ends December 31.
Required:
What amount should be recorded as machinery depreciation for the year ended December 31, 2021 and 2022 respectively? Complete the schedule provided below.
|
Sum of the years' digits factor |
Answer |
|
|
$Answer |
|
April 1, 2021 to March 31, 2022 Depreciation expense |
$Answer |
|
April 1, 2022 to March 31, 2023 Depreciation expense |
$Answer |
|
|
|
|
Depreciation expense for year ended December 31, 2021 |
$Answer |
|
Depreciation expense for year ended December 31, 2022 |
$Answer |
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