Harley Davis Inc. started its unicycle manufacturing business in 2020 and acquired $600,000 of equipment at the beginning of 2020. It decided to use the double-declining balance (DDB) depreciation on its equipment with no residual value and a 10-year useful life. In 2020 it changed to the straight-line depreciation method. Depreciation computed for 2020-2021 is presented below: Year DDB 2020 $120,000 2021 96,000 In 2022, what would Harley Davis report for 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.
Harley Davis Inc. started its unicycle manufacturing business in 2020 and acquired $600,000 of equipment at the beginning of 2020. It decided to use the double-declining balance (DDB)
|
Year |
DDB |
|
2020 |
$120,000 |
|
2021 |
96,000 |
In 2022, what would Harley Davis report for depreciation expense?
Depreciation expense is the amount depreciated on a company's assets in a single period, whereas accumulated depreciation is the total sum of wear to date. Accumulated depreciation is not an asset, nor is accumulated depreciation.
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