II- Wins plc purchased a new machine on October 1, 2018, at a cost of £120,000. The company estimated that the machine will have a residual value of £12,000. The machine is expected to be used for 12,000 working hours during its 4-year life. Instructions Compute the depreciation expense under the following methods for the year indicated. (a) Straight-line for 2018. (b) Units-of-activity for 2018, assuming machine usage was 1,700 hours. (c) Declining-balance using double the straight-line rate for 2018 and 2019.

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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.