On January 1, 2018, Canseco Plumbing Fixtures purchased equipment for $30,000. Residual value at the endof an estimated four-year service life is expected to be $2,000. The company expects the machine to operatefor 10,000 hours. Calculate depreciation expense for 2018 and 2019 using each of the following depreciationmethods: (a) straight line, (b) sum-of-the-years’-digits, (c) double-declining balance, and (d) units-of-productionusing machine hours. The machine operated for 2,200 and 3,000 hours in 2018 and 2019, respectively
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 1, 2018, Canseco Plumbing Fixtures purchased equipment for $30,000. Residual value at the end
of an estimated four-year service life is expected to be $2,000. The company expects the machine to operate
for 10,000 hours. Calculate
methods: (a) straight line, (b) sum-of-the-years’-digits, (c) double-declining balance, and (d) units-of-production
using machine hours. The machine operated for 2,200 and 3,000 hours in 2018 and 2019, respectively
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