Depreciation Methods On January 2, Skyler, Inc. purchased a laser cutting machine to be used in the fabrication of a part for one of its key products. The machine cost $90,000, and its estimated useful life was four years or 850,000 cuttings, after which it could be sold for $5,000. Required a. Calculate each year's depreciation expense for the machine's useful life under each of the following depreciation methods (round all answers to the nearest dollar): 1. Straight-line. 2. Double-declining balance. 3. Units-of-production. (Assume annual production in cuttings of 200,000; 350,000; 260,000; and 40,000.) 1. Straight-Line Year Expense Year 1 Year 2 Year 3 Year 4 Depreciation Year Year 1 Year 2 Year 3 Year 4 Year 5 $ 2. Double-declining balance Depreciation Expense $
Depreciation Methods On January 2, Skyler, Inc. purchased a laser cutting machine to be used in the fabrication of a part for one of its key products. The machine cost $90,000, and its estimated useful life was four years or 850,000 cuttings, after which it could be sold for $5,000. Required a. Calculate each year's depreciation expense for the machine's useful life under each of the following depreciation methods (round all answers to the nearest dollar): 1. Straight-line. 2. Double-declining balance. 3. Units-of-production. (Assume annual production in cuttings of 200,000; 350,000; 260,000; and 40,000.) 1. Straight-Line Year Expense Year 1 Year 2 Year 3 Year 4 Depreciation Year Year 1 Year 2 Year 3 Year 4 Year 5 $ 2. Double-declining balance Depreciation Expense $
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
On January 2, Skyler, Inc. purchased a laser cutting machine to be used in the fabrication of a part for one of its key products. The machine cost $90,000, and its estimated useful life was four years or 850,000
cuttings, after which it could be sold for $5,000.
Required
a. Calculate each year's depreciation expense for the machine's useful life under each of the following depreciation methods (round all answers to the nearest dollar):
1. Straight-line.
2. Double-declining balance.
3. Units-of-production. (Assume annual production in cuttings of 200,000; 350,000; 260,000; and 40,000.)
1. Straight-Line
Depreciation
Year Expense
Year 1 $
Year 2
Year 3
Year 4
2. Double-declining balance
Depreciation
Expense
Year
Year 1
Year 2
Year 3
Year 4
Year 5
$
3. Units of Production
Transcribed Image Text:3. Units of Production
Depreciation
Expense
Year
Year 1 $
Year 2
Year 3
Year 4
b. Assume that the machine was purchased on July 1. Calculate each year's depreciation expense for the machine's useful life under each of the following depreciation methods:
1. Straight-line.
2. Double-declining balance.
1. Straight-Line
Year Expense
Year 1
Year 2
Year 3
Year 4
Year 5
Depreciation
Year
Year 1
Year 2
Year 3
Year 4
Year 5
$
2. Double-declining balance (Round answers to the nearest whole number, when appropriate.)
Depreciation
Expense
$
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Step 1: Define Depreciation
VIEWStep 2: a) 1. Computation of Depreciation using Straight-line
VIEWStep 3: a) 2. Computation of Depreciation using Double declining method
VIEWStep 4: a) 3. Computation of Depreciation using units of production
VIEWStep 5: b) 1. Computation of Depreciation using Straight-line method
VIEWStep 6: b) 2. Computation of Depreciation using Double declining method
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