Depreciable mining equipment costing $100,000 is expected to have a useful life of 120,000 units of production. Salvage value is 0, estimated annual production for the next seven years is 30,000 units, 30,000, 20,000, then 10,000 units per year over the remaining four years. Total = 120,000 units. Using the depreciation method "units of production", determine the allowable annual depreciation for each of the seven years. Using the MACRS method of depreciation, determine the allowable annual depreciation for each year, assuming the half year convention, i.e. depreciation over 8 years.

Depreciable mining equipment costing $100,000 is expected to have a useful life of 120,000 units of production. Salvage value is 0, estimated annual production for the next seven years is 30,000 units, 30,000, 20,000, then 10,000 units per year over the remaining four years. Total = 120,000 units. Using the depreciation method "units of production", determine the allowable annual depreciation for each of the seven years. Using the MACRS method of depreciation, determine the allowable annual depreciation for each year, assuming the half year convention, i.e. depreciation over 8 years.

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Description: A) using the depreciation method units of productipn determine the allowable depreciation for each of the 7 yearsB) using the MACRS depreciation determine the allowable annual depreciation for each year, assuming the half year convention, ie deprecia

FINANCIAL ACCOUNTING

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Chapter1: Financial Statements And Business Decisions

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Concept explainers

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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Question

A) using the depreciation method units of productipn determine the allowable depreciation for each of the 7 years

B) using the MACRS depreciation determine the allowable annual depreciation for each year, assuming the half year convention, ie depreciation over 8 years

Depreciable mining equipment costing $100,000 is expected to have a useful life of 120,000 units of
production. Salvage value is 0, estimated annual production for the next seven years is 30,000 units,
30,000, 20,000, then 10,000 units per year over the remaining four years. Total =
120,000 units.
Using the depreciation method "units of production", determine the allowable annual depreciation for
each of the seven years.
Using the MACRS method of depreciation, determine the allowable annual depreciation for each
year, assuming the half year convention, i.e. depreciation over 8 years.

Definition Video Definition Accounting method wherein the cost of a tangible asset is spread over the asset's useful life. Depreciation usually denotes how much of the asset's value has been used up and is usually considered an operating expense. Depreciation occurs through normal wear and tear, obsolescence, accidents, etc. Video

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Step 2: (A) Calculate the depreciation expense under 'Units of production method' for seven years:

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Step 3: (B) Calculate the depreciation expense under 'MACRS Method' for eight years:

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