Mountain View Resorts purchased equipment at the beginning of 2021 for $41,000. Residual value at the end of an estimated four-year service life is expected to be $6,600. The machine operated for 1,600 hours in the first year and the company expects the machine to operate for a total of 11,000 hours over its four-year life. Calculate depreciation expense for 2021, using each of the following depreciation methods: (1) straight-line, (2) double-declining-balance, and (3) activity-based. (Round your intermediate calculations to 2 decimal places.)
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.
Mountain View Resorts purchased equipment at the beginning of 2021 for $41,000. Residual value at the end of an estimated four-year service life is expected to be $6,600. The machine operated for 1,600 hours in the first year and the company expects the machine to operate for a total of 11,000 hours over its four-year life.
Calculate
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
