On January 1, the Matthews Band pays $65,600 for sound equipment. The band estimates it will use this equipment for five years and perform 200 concerts. It estimates that after five years it can sell the equipment for $2,000. During the first year, the band performs 55 concerts. Compute the first-year depreciation using the units-of-production method.
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, the Matthews Band pays $65,600 for sound equipment. The band estimates it will use this equipment for five years and perform 200 concerts. It estimates that after five years it can sell the equipment for $2,000. During the first year, the band performs 55 concerts.
Compute the first-year
Trending now
This is a popular solution!
Learn your way
Includes step-by-step video
Step by step
Solved in 2 steps
