Equipment purchased at the beginning of the fiscal year for $360,000 is expected to have a useful life of 5 years, or 14,000 operating hours, and a residual value of $10,000. Compute the depreciation for the first and second years of use by each of the following methods. a. Straight-line: First year $fill in the blank 1 Second year $fill in the blank 2 b. Units-of-output (1,200 hours first year; 2,250 hours second year): First year $fill in the blank 3 Second year $fill in the blank 4
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.
Equipment purchased at the beginning of the fiscal year for $360,000 is expected to have a useful life of 5 years, or 14,000 operating hours, and a residual value of $10,000.
Compute the
a. Straight-line:
| First year | $fill in the blank 1 |
| Second year | $fill in the blank 2 |
b. Units-of-output (1,200 hours first year; 2,250 hours second year):
| First year | $fill in the blank 3 |
| Second year | $fill in the blank 4 |
c. Double-declining-balance:
| First year | $fill in the blank 5 |
| Second year | $fill in the blank 6 |
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