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Name: ↑2W↑43#On January 2, 2014, Able Company acquired new equipment at a c
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Description: ↑2W↑43#On January 2, 2014, Able Company acquired new equipment at a cost of $290,000. The machinehas an estimated useful life of 5 years, or 25,000 operating hours, after which it will have anestimated residual value of $15,000. Compute the deprecia

Business

Accounting

estimated residual value of $15,000. Compute the depreciation charges for the first two years (2014 and 2015), using the following melthods. (SHOW ALL COMPUTATIONS.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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

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2
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43
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On January 2, 2014, Able Company acquired new equipment at a cost of $290,000. The machine
has an estimated useful life of 5 years, or 25,000 operating hours, after which it will have an
estimated residual value of $15,000. Compute the depreciation charges for the first two years (2014
and 2015), using the following mel thods. (SHOW ALL COMPUTATIONS.)
Straight-line
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b.
с
C.
Units-of-production (Equipment was used 8,000 hours during 2014 and 7,000 hours during
2015.)
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4
Double-declining balance
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%
65
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