mation applies to the questions displayed below.] s $256,400 for equipment that will last five years and have a $45,400 salvage t in its operations for five years, the company expects to earn $90,300 annually ses except depreciation. tion expense using double-declining-balance method.
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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[The following information applies to the questions displayed below.]
Tory Enterprises pays $256,400 for equipment that will last five years and have a $45,400 salvage value. By
using the equipment in its operations for five years, the company expects to earn $90,300 annually, after
deducting all expenses except depreciation.
Calculate annual depreciation expense using double-declining-balance method.
Prepare a table showing income before depreciation, depreciation expense, and net (pretax) income for each year and for the total
five-year period, assuming double-declining-balance depreciation is used.
Complete this question by entering your answers in the tabs below.
Depreciation
Schedule
Calculate annual depreciation expenses using double-declining-balance method.
Note: Round Annual Depreciation to the nearest whole dollar.
Year
Income
Computation
Year 1
Depreciation for the Period
Beginning of
Period Book
Value
O
8
Depreciation Annual
Rate
9
Depreciation
< Prev
no
End of Period
Accumulated
Depreciation
S
8
of 10
Book Value
Next >
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prt sc
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Double Declining Rate = (100% /no of years)*2
=100%/5 years *2
=40%
The annual depreciation in the 4th year will be upto the salvage value. It is the difference between the book value and salvage valu
There will be no depreciation expense in the 5th year.
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