On 25 March 2020, Miracle Company bought a machine at $1,350,000 with an estimated useful life of 15 years and no residual value. The machine is expected to operate 270,000 hours. The company adjusts its account annually with the year-end date on 31 December. Required: (a) Compute(showworkings)depreciationexpensesforthemachinein2020and2021by: (i) Straight-line (using half year convention); (ii) 150%-declining-balance (calculate to the nearest whole month); and (iii) Units-of-output method (hours of operation: 12,000 in 2020; 18,000 in 2021) (b) AssumeMiracleCompanyadoptsthestraight-linemethodin(a)(i)above.On5April2022themachine was disposed for $1,150,000 cash. (i) Journalize depreciation of the machine for 2022 before the disposal. (ii) Journalize disposal of the machine on 5 April 2022.

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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.