Davis machine works purchased a stamping machine $135,000 on March 1, 2007. The machine is expected to have a useful life of 5 years, salvage value of $12,000, production of 250,000 units, and number of working hours of 30,000. During 2007, Davis used the stamping machine for 2450 hours to produce 23,450 units. From the information given compute the book depreciation expenses for the life of the machine under each of the following methods: (a) straight-line (b) double- declining-balance (without conversion to straight-line depreciation) (c) units of production
Davis machine works purchased a stamping machine $135,000 on March 1, 2007. The machine is expected to have a useful life of 5 years, salvage value of $12,000, production of 250,000 units, and number of working hours of 30,000. During 2007, Davis used the stamping machine for 2450 hours to produce 23,450 units. From the information given compute the book depreciation expenses for the life of the machine under each of the following methods: (a) straight-line (b) double- declining-balance (without conversion to straight-line depreciation) (c) units of production
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:Davis machine works purchased a
stamping machine $135,000 on March 1,
2007. The machine is expected to have a
useful life of 5 years, salvage value of
$12,000, production of 250,000 units, and
number of working hours of 30,000. During
2007, Davis used the stamping machine for
2450 hours to produce 23,450 units. From
the information given compute the book
depreciation expenses for the life of the
machine under each of the following
methods: (a) straight-line (b) double-
declining-balance (without conversion to
straight-line depreciation) (c) units of
production
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