In recent years, Blue Spruce Company has purchased three machines. Because of frequent employee turnover in the accounting department, a different accountant was in charge of selecting the depreciation method for each machine, and various methods have been used. Information concerning the machines is summarized in the table below. Machine 1 2 Acquired Jan. 1, 2020 July 1, 2021 Nov. 1, 2021 Cost $96,800 88,500 98,000 Salvage Value $ 13,000 12,000 8,000 Useful Life (in years) 8 5 6 Depreciation Method Straight-line Declining-balance Units-of-activity For the declining-balance method, Blue Spruce Company uses the double-declining rate. For the units-of-activity method, total machine hours are expected to be 45,000. Actual hours of use in the first 3 years were 2021, 700; 2022, 4,900; and 2023, 8,000.
In recent years, Blue Spruce Company has purchased three machines. Because of frequent employee turnover in the accounting department, a different accountant was in charge of selecting the depreciation method for each machine, and various methods have been used. Information concerning the machines is summarized in the table below. Machine 1 2 Acquired Jan. 1, 2020 July 1, 2021 Nov. 1, 2021 Cost $96,800 88,500 98,000 Salvage Value $ 13,000 12,000 8,000 Useful Life (in years) 8 5 6 Depreciation Method Straight-line Declining-balance Units-of-activity For the declining-balance method, Blue Spruce Company uses the double-declining rate. For the units-of-activity method, total machine hours are expected to be 45,000. Actual hours of use in the first 3 years were 2021, 700; 2022, 4,900; and 2023, 8,000.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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.
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Transcribed Image Text:In recent years, Blue Spruce Company has purchased three machines. Because of frequent employee turnover in the accounting
department, a different accountant was in charge of selecting the depreciation method for each machine, and various methods
have been used. Information concerning the machines is summarized in the table below.
Machine
1
2
3
Acquired
Jan. 1, 2020
July 1, 2021
Nov. 1, 2021
Cost
$ 96,800
88,500
98,000
Salvage
Value
$ 13,000
12,000
8,000
Useful Life
(in years)
8
5
6
Depreciation
Method
Straight-line
Declining-balance
Units-of-activity
For the declining-balance method, Blue Spruce Company uses the double-declining rate. For the units-of-activity method, total
machine hours are expected to be 45,000. Actual hours of use in the first 3 years were 2021, 700; 2022, 4,900; and 2023, 8,000.
Transcribed Image Text:In recent years, Blue Spruce Company has purchased three machines. Because of frequent employee turnover in the accounting
department, a different accountant was in charge of selecting the depreciation method for each machine, and various methods
have been used. Information concerning the machines is summarized in the table below.
Machine
1
2
3
Acquired
Jan. 1, 2020
July 1, 2021
Nov. 1, 2021
Cost
$ 96,800
88,500
98,000
Salvage
Value
$ 13,000
12,000
8,000
Useful Life
(in years)
8
5
6
Depreciation
Method
Straight-line
Declining-balance
Units-of-activity
For the declining-balance method, Blue Spruce Company uses the double-declining rate. For the units-of-activity method, total
machine hours are expected to be 45,000. Actual hours of use in the first 3 years were 2021, 700; 2022, 4,900; and 2023, 8,000.
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