Depreciation Methods Gruman Company purchased a machine for $220,000 on January 2, 2016. It made the following estimates: Service life e S years or 10,000 hours Production 200,000 units Residual value $20,000 In 2016, Gruman uses the machine for 1,800 hours and produces 44,000 units. In 2017, Gruman uses the machine for 1,500 hours and produces 35,000 units. If required, round your final answers to the nearest dollar. Required: 1. Compute the depreciation for 2016 and 2017 under each of the following methods: a. Straight-line method 2016 s 2017 S b. Sum-of-the-years'-digits method 2016 s 2017 s c. Double-declining-balance method 2016 s 2017s d. Activity method based on hours worked 2016 S 2017 $ e. Activity method based on units of output 2016 S 2017 s 2. For each method, what is the book value of the machine at the end of 2016? At the end of 20177 a. Straight-line method 2016 S 2017S

Depreciation Methods Gruman Company purchased a machine for $220,000 on January 2, 2016. It made the following estimates: Service life e S years or 10,000 hours Production 200,000 units Residual value $20,000 In 2016, Gruman uses the machine for 1,800 hours and produces 44,000 units. In 2017, Gruman uses the machine for 1,500 hours and produces 35,000 units. If required, round your final answers to the nearest dollar. Required: 1. Compute the depreciation for 2016 and 2017 under each of the following methods: a. Straight-line method 2016 s 2017 S b. Sum-of-the-years'-digits method 2016 s 2017 s c. Double-declining-balance method 2016 s 2017s d. Activity method based on hours worked 2016 S 2017 $ e. Activity method based on units of output 2016 S 2017 s 2. For each method, what is the book value of the machine at the end of 2016? At the end of 20177 a. Straight-line method 2016 S 2017S

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Description: b. Sum-of-the-years'-digits method2016 $2017 $c. Double-declining-balance method2016 $2017 $d. Activity method based on hours worked2016 $2017 $e. Activity method based on units of output2016 $2017 $3. If Gruman used a service life of 8 years or 15,

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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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.

Topic Video

Question

b. Sum-of-the-years'-digits method
2016 $
2017 $
c. Double-declining-balance method
2016 $
2017 $
d. Activity method based on hours worked
2016 $
2017 $
e. Activity method based on units of output
2016 $
2017 $
3. If Gruman used a service life of 8 years or 15,000 hours and a residual value of $10,000, 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
2016 $
2017 $
b. Sum-of-the-years'-digits method
2016 $
2017 $
c. Double-declining-balance method
2016 $
2017 $
Book value
a. Straight-line method
2016 $
2017 $
b. Sum-of-the-years'-digits method
2016 $

Depreciation Methods
Gruman Company purchased a machine for $220,000 on January 2, 2016. It made the following estimates:
Service life
5 years or 10,000 hours
Production
200,000 units
Residual value
$20,000
In 2016, Gruman uses the machine for 1,800 hours and produces 44,000 units. In 2017, Gruman uses the machine for 1,500 hours and produces 35,000 units. If required, round your final answers to the nearest dollar.
Required:
1. Compute the depreciation for 2016 and 2017 under each of the following methods:
a. Straight-line method
2016 $
2017 $
b. Sum-of-the-years'-digits method
2016 $
2017 $
c. Double-declining-balance method
2016 $
2017 $
d. Activity method based on hours worked
2016 $
2017 $
e. Activity method based on units of output
2016 $
2017 $
2. For each method, what is the book value of the machine at the end of 2016? At the end of 2017?
a. Straight-line method
2016 $
2017 $

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