Equipment costing $120,000, with a scrap value of $20,000 was purchased on January 1, by Global Communications, Inc. The estimated useful life of the equipment was 4 years and it was expected to generate 80,000 finished units of production. Units actually produced were 14,000 in Year 1 and 20,000 in Year 2. Required Complete the following table. Depreciation Expense Net Book Value Depreciation Method Year 1 Year 2 Year 1 year-end Year 2 year-end Straight-line Double-declining-balance Units-of-production
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.
Estimating
Equipment costing $120,000, with a scrap value of $20,000 was purchased on January 1, by Global Communications, Inc. The estimated useful life of the equipment was 4 years and it was expected to generate 80,000 finished units of production.
Units actually produced were 14,000 in Year 1 and 20,000 in Year 2.
Required
Complete the following table.
| Depreciation Expense | Net Book Value | ||||
|---|---|---|---|---|---|
Depreciation Method |
Year 1 |
Year 2 |
Year 1 year-end |
Year 2 year-end |
|
| Straight-line | |||||
| Double-declining-balance | |||||
| Units-of-production |
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