Happy Production purchased a new computerized machine at a cost of $450,000. The machine has a residual value of $64,000 and an expected life of 5 years. Calculate the depreciation expense, accumulated depreciation, and book value for all 5 years of the machine's expected life using the double-declining-balance method of depreciation. For year 4, do not double the depreciation ratio (just use the single declining balance ratio) and for year 5, use the previous year's book value and the known ending residual value to calculate that last year of depreciation expense.
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.
Happy Production purchased a new computerized machine at a cost of $450,000. The machine has a residual value of $64,000 and an expected life
of 5 years.
Calculate the
machine's expected life using the double-declining-balance method of depreciation. For year 4, do not double the depreciation ratio (just use the
single declining balance ratio) and for year 5, use the previous year's book value and the known ending residual value to calculate that last year of
depreciation expense.
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