Compute depreciation under alternative methods Equipment costing $130,000 is expected to have a residual value of $10,000 at the end of its 6 years usefulness. The equipment is metered, so the number of units processed are counted. The equipment is designed to process 1million unit during its lifetime. In 2016 and 2017 the equipment processed 180,000 and 140,000 units respectively. Calculate the depreciation expense for 2016-2017 using each of the following methods: a. Straight -lineb. Double- declining balance c. Units of production
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.
Compute
Equipment costing $130,000 is expected to have a residual value of $10,000 at the end of its 6 years usefulness. The equipment is metered, so the number of units processed are counted. The equipment is designed to process 1million unit during its lifetime. In 2016 and 2017 the equipment processed 180,000 and 140,000 units respectively. Calculate the depreciation expense for 2016-2017 using each of the following methods:
a. Straight -line
b. Double- declining balance
c. Units of production
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