Mason Industries purchased a drilling rig for $75,900. Delivery costs totaled $2,824. The useful life is 7 years and the salvage value is $12,959. Prepare a depreciation schedule using the straight-line method. Mason IndustriesDepreciation Schedule—Drilling End of Year Annual Depreciation ($) Accumulated Depreciation ($) Book Value ($) $78,724 (new) 1 2 3 4 5 6 7 Step 1 Straight-line depreciation provides for equal periodic charges to be written off over the estimated useful life of an asset. A depreciation schedule is a chart illustrating the depreciation activity of the asset for each year of its useful life. The chart shows the total cost of the asset, the number of useful life years, the amount of depreciation each year, the accumulated depreciation to date, the book value at the end of each year, and the salvage value of the asset. The first values to find are the total cost and total depreciation. The total cost is the purchase price of the asset and any other fees, such as delivery. The price of the drilling rig is $75,900 and there are delivery costs of $2,824. Find the total cost (in $) of the drilling rig when it was new. total cost = purchase price + other fees = 75,900 + 2,824 = $ The total depreciation is the decrease in value from the total cost of an asset over its useful life. It is calculated as the difference of the total cost and the salvage value. The drilling rig has a salvage value of $12,959. Use the calculated total cost and the salvage value to find the total amount of depreciation (in $). total depreciation = total cost − salvage value

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Mason Industries purchased a drilling rig for $75,900. Delivery costs totaled $2,824.

The useful life is 7 years and the salvage value is $12,959. Prepare a depreciation schedule using the straight-line method.

Mason IndustriesDepreciation Schedule—Drilling

End of Year	Annual Depreciation ($)	Accumulated Depreciation ($)	Book Value ($)
	$78,724 (new)
1
2
3
4
5
6
7

Step 1

Straight-line depreciation provides for equal periodic charges to be written off over the estimated useful life of an asset. A depreciation schedule is a chart illustrating the depreciation activity of the asset for each year of its useful life. The chart shows the total cost of the asset, the number of useful life years, the amount of depreciation each year, the accumulated depreciation to date, the book value at the end of each year, and the salvage value of the asset.

The first values to find are the total cost and total depreciation. The total cost is the purchase price of the asset and any other fees, such as delivery. The price of the drilling rig is $75,900 and there are delivery costs of $2,824. Find the total cost (in $) of the drilling rig when it was new.

total cost	=	purchase price + other fees
	=	75,900 + 2,824
	=	$

The total depreciation is the decrease in value from the total cost of an asset over its useful life. It is calculated as the difference of the total cost and the salvage value. The drilling rig has a salvage value of $12,959. Use the calculated total cost and the salvage value to find the total amount of depreciation (in $).

total depreciation	=	total cost − salvage value
	=	$

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