E10-6 Kelm Company purchased a new machineon October 1,2008, at a cost of $120.000. the Company estimatedthat the machine will have a salvage value of $12,000. The machine k pected to be used for 10,000 working hours duringíts 5-year life. Instructions Compute the depreciation expense under the following methods for the year indicated. (a) Straight-Ime for 2008. (b) Upils-of-activity for 2008, assuming machine usage was 1,700 hours (c) Đeclining-balance using double the straight-line rate for 2008 and 2009.
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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E10-6 Kelm Company purchased a new machineon October 1,2008, at a cost of $120.000. the Company estimatedthat the machine will have a salvage value of $12,000. The machine k pected to be used for 10,000 working hours duringíts 5-year life.
Instructions
Compute the
(a) Straight-Ime for 2008.
(b) Upils-of-activity for 2008, assuming machine usage was 1,700 hours
(c) Đeclining-balance using double the straight-line rate for 2008 and 2009.
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