Following the depreciation example on page 7-6 of the VLN, determine 150% declining balance year 2 depreciation expense?____________
Following the depreciation example on page 7-6 of the VLN, determine 150% declining balance year 2 depreciation expense?____________
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.
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Question
Following the depreciation example on page 7-6 of the VLN, determine 150% declining balance year 2 depreciation expense?____________
![Alternative Depreciation Methods
Straight-line (SL)
Depreciation expense = Cost – Residual value
Life in years
Declining-balance (DB) or Accelerated method. (200%
maximum Declining rate, if the declining rate is 200% it is
called Double Declining Balance)
DB Depreciation Rate = Declining rate
Life in years
Depreciation expense = DB Depreciation Rate x Beginning
of the year Book Value
Depreciation expense
Accumulated depreciation)
DB Depreciation Rate x (Cost -
Activity-Based (Units of Production)
Cost - Residual value
Life in units
Depreciation rate per unit =
production
Depreciation expense = Depreciation rate per unit x Units
of production for the year
Practice
A new stamping machine was purchased at a cost of $125,000.
The estimated residual value is $20,000, and the estimated
useful life is 3 years. The estimated productive life of the
machine is 150,000 units.
Determine the following for Straight line Depreciation
Cost
RV
Depreciable cost
Life
Year 1
Depreciation expense
Accumulated depreciation
Book value
Year 2
Depreciation expense
Accumulated depreciation
Book value
Year 3
Depreciation expense
Accumulated depreciation
Book value](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F8b4c8a73-734f-4d1e-af6c-6ab0da8a3252%2F7a0a3df3-6961-41be-a75b-f44fdfd640c2%2Fhz0ko_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Alternative Depreciation Methods
Straight-line (SL)
Depreciation expense = Cost – Residual value
Life in years
Declining-balance (DB) or Accelerated method. (200%
maximum Declining rate, if the declining rate is 200% it is
called Double Declining Balance)
DB Depreciation Rate = Declining rate
Life in years
Depreciation expense = DB Depreciation Rate x Beginning
of the year Book Value
Depreciation expense
Accumulated depreciation)
DB Depreciation Rate x (Cost -
Activity-Based (Units of Production)
Cost - Residual value
Life in units
Depreciation rate per unit =
production
Depreciation expense = Depreciation rate per unit x Units
of production for the year
Practice
A new stamping machine was purchased at a cost of $125,000.
The estimated residual value is $20,000, and the estimated
useful life is 3 years. The estimated productive life of the
machine is 150,000 units.
Determine the following for Straight line Depreciation
Cost
RV
Depreciable cost
Life
Year 1
Depreciation expense
Accumulated depreciation
Book value
Year 2
Depreciation expense
Accumulated depreciation
Book value
Year 3
Depreciation expense
Accumulated depreciation
Book value
![Determine the following table for 150% Declining Balance
Depreciation
Cost
RV
Depreciable cost
Life
Year 1
Depreciation expense
Accumulated depreciation
Book value
Year 2
Depreciation expense
Accumulated depreciation
Book value
Year 3
Depreciation expense
Accumulated depreciation
Book value
Determine the following for Activity-Based (Units of
Production) Depreciation
Cost
RV
Depreciable cost
Life
Year Units made
52,000 units
50,000 units
48,000 units
Year 1
Depreciation expense
Accumulated depreciation
Book value
Year 2
Depreciation expense
Accumulated depreciation
Book value
Year 3
Depreciation expense
Accumulated depreciation
Book value](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F8b4c8a73-734f-4d1e-af6c-6ab0da8a3252%2F7a0a3df3-6961-41be-a75b-f44fdfd640c2%2Fnwbbg1k_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Determine the following table for 150% Declining Balance
Depreciation
Cost
RV
Depreciable cost
Life
Year 1
Depreciation expense
Accumulated depreciation
Book value
Year 2
Depreciation expense
Accumulated depreciation
Book value
Year 3
Depreciation expense
Accumulated depreciation
Book value
Determine the following for Activity-Based (Units of
Production) Depreciation
Cost
RV
Depreciable cost
Life
Year Units made
52,000 units
50,000 units
48,000 units
Year 1
Depreciation expense
Accumulated depreciation
Book value
Year 2
Depreciation expense
Accumulated depreciation
Book value
Year 3
Depreciation expense
Accumulated depreciation
Book value
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