On January 01, 2019, the AI Wadi Company purchased machinery for OR 45,000. The estimated useful life of the machinery is 8 years and the estimated residual value is OR 5,000. Al Afiya's financial year ends on December 31. The machine is expected to produce 120,000 units during its life. Using the double-declining balance method, depreciation for 2019, and the book value on December 31, 2019 would be: Round all computations to the nearest Riyal Select one: O a. 11,250 and 28,750 O b. 10,000 and 30,000. O c. 10,000 and 35,000. O d. 11,250 and 33,750.
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.
On January 01, 2019, the
Select one:
O a. 11,250 and 28,750
O b. 10,000 and 30,000.
O c. 10,000 and 35,000.
O d. 11,250 and 33,750.
Depreciation:-It is the reduction in the value of the assets due to normal wear and tear. It is the expenses for the company, hence appear in the Income statement. It is calculated when the value of the assets gets amortized over its useful life.
Using the double-declining balance method, Calculation of depreciation for 2019, and the book value on December 31, 2019:-
Depreciation for 2019 is $11,250.
Book Value on Dec 31, 2019 is $33,750.
Working Note:-
Calculation of Double Declining Rate:-
Step by step
Solved in 3 steps
