Depreciation Methods Gruman Company purchased a machine for $198,000 on January 2, 2019. It made the following estimates: 5 years or 10,000 hours Service life Production 180,000 units Residual value $ 18,000 In 2019, Gruman uses the machine for 1,700 hours and produces 50,000 units. In 2020, Gruman uses the machine for 1,400 hours and produces 32,000 units. If required, round your final answers to the nearest dollar. Required: 1. Compute the depreciation for 2019 and 2020 under each of the following methods: a. Straight-line method 2019 $ 36,000 2020 $ 36,000 v b. Sum-of-the-years'-digits method 2019 $ 60,000 2020 $ 48,000 c. Double-declining-balance method 2019 $ 79,200 v 2020 $ 47,520 V d. Activity method based on hours worked 2019 $ 30,636 x 2020 $ 25,200 v e. Activity method based on units of output 2019 $ 50,000 v 2020 $ 32,000 V 2. For each method, what is the book value of the machine at the end of 2019? At the end of 2020? a. Straight-line method 2019 $ 36,000 x 2020 $ 36,000 x b. Sum-of-the-years'-digits method 2019 $ 2020 $ c. Double-declining-balance method 2019 $ 2020 $ d. Activity method based on hours worked 2019 $ 2020 $ e. Activity method based on units of output 2019 $ 2020 $ 3. If Gruman used a service life of 8 years or 15,000 hours and a residual value of $9,000 , what would be the effect on the following under the straight-line, sum-of- the-years'-digits, and double-declining-balance depreciation methods? Depreciation expense a. Straight-line method
Depreciation Methods Gruman Company purchased a machine for $198,000 on January 2, 2019. It made the following estimates: 5 years or 10,000 hours Service life Production 180,000 units Residual value $ 18,000 In 2019, Gruman uses the machine for 1,700 hours and produces 50,000 units. In 2020, Gruman uses the machine for 1,400 hours and produces 32,000 units. If required, round your final answers to the nearest dollar. Required: 1. Compute the depreciation for 2019 and 2020 under each of the following methods: a. Straight-line method 2019 $ 36,000 2020 $ 36,000 v b. Sum-of-the-years'-digits method 2019 $ 60,000 2020 $ 48,000 c. Double-declining-balance method 2019 $ 79,200 v 2020 $ 47,520 V d. Activity method based on hours worked 2019 $ 30,636 x 2020 $ 25,200 v e. Activity method based on units of output 2019 $ 50,000 v 2020 $ 32,000 V 2. For each method, what is the book value of the machine at the end of 2019? At the end of 2020? a. Straight-line method 2019 $ 36,000 x 2020 $ 36,000 x b. Sum-of-the-years'-digits method 2019 $ 2020 $ c. Double-declining-balance method 2019 $ 2020 $ d. Activity method based on hours worked 2019 $ 2020 $ e. Activity method based on units of output 2019 $ 2020 $ 3. If Gruman used a service life of 8 years or 15,000 hours and a residual value of $9,000 , what would be the effect on the following under the straight-line, sum-of- the-years'-digits, and double-declining-balance depreciation methods? Depreciation expense a. Straight-line method
Chapter1: Financial Statements And Business Decisions
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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:Depreciation Methods
Gruman Company purchased a machine for $198,000 on January 2, 2019. It made
the following estimates:
5 years or 10,000 hours
Service life
Production
180,000 units
Residual value
$ 18,000
In 2019, Gruman uses the machine for 1,700 hours and produces 50,000 units. In
2020, Gruman uses the machine for 1,400 hours and produces 32,000 units. If
required, round your final answers to the nearest dollar.
Required:
1. Compute the depreciation for 2019 and 2020 under each of the following methods:
a. Straight-line method
2019 $ 36,000
2020 $
36,000
b. Sum-of-the-years'-digits method
60,000 v
2019 $
2020 $
48,000
c. Double-declining-balance method
2019 $
79,200
2020 $ 47,520
d. Activity method based on hours worked
2019 $ 30,636 x
2020 $
25,200
e. Activity method based on units of output
2019 $
50,000 v
2020 $
32,000
2. For each method, what is the book value of the machine at the end of 2019? At the
end of 2020?
a. Straight-line method
2019 $ 36,000 x
2020 $ 36,000 x
b. Sum-of-the-years'-digits method
2019 $
2020 $
c. Double-declining-balance method
2019 $
2020 $
d. Activity method based on hours worked
2019 $
2020 $
e. Activity method based on units of output
2019 $
2020 $
3. If Gruman used a service life of 8 years or 15,000 hours and a residual value of
$9,000 , what would be the effect on the following under the straight-line, sum-of-
the-years'-digits, and double-declining-balance depreciation methods?
Depreciation expense
a. Straight-line method
Transcribed Image Text:Depreciation expense
a. Straight-line method
2019 $
2020 $
b. Sum-of-the-years'-digits method
2019 $
2020 $
c. Double-declining-balance method
2019 $
2020 $
Book value
a. Straight-line method
2019 $
2020 $
b. Sum-of-the-years'-digits method
2019 $
2020 $
c. Double-declining-balance method
2019 $
2020 $
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