On January 1, 2019, Caylor Corp. purchases a machine for $185,000, estimated useful life of 40,000 machine hours, salvage value of $7,500. Actual hours of operation are: 2019: 13,000 hours; 2020: 15,000 hours; 2021: 14,000 hours. They use UOP depreciation. Compute depreciation for 2019 – 2021. Round the rate to 2 decimals. 2. On March 1, 2017, Effy Company purchases for $600,000 a machine that Efay estimates will have a useful life of 50,000 machine hours and a salvage value of for $15,000. In Year 1, Effy uses the machine for 11,100 hours; in Year 2, 8,600 hours; in Year 3, 9,100 hours; in Year 4, 12,000 hours; and in Year 5, 13,600. They use UOP depreciation.
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.
1. On January 1, 2019, Caylor Corp. purchases a machine for $185,000, estimated useful life of 40,000 machine hours, salvage value of $7,500. Actual hours of operation are: 2019: 13,000 hours; 2020: 15,000 hours; 2021: 14,000 hours. They use UOP
2. On March 1, 2017, Effy Company purchases for $600,000 a machine that Efay estimates will have a useful life of 50,000 machine hours and a salvage value of for $15,000. In Year 1, Effy uses the machine for 11,100 hours; in Year 2, 8,600 hours; in Year 3, 9,100 hours; in Year 4, 12,000 hours; and in Year 5, 13,600. They use UOP depreciation.
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