On January 2, 2010, Sayre Company purchased a machine for $45,000. The machine has a five-year estimated useful life and a $3,000 estimated residual value. In addition, the company expects the machine to produce 200,000 units. Assuming that the machine produced 35,000 and 45,000 units during 2010 and 2011, respectively, complete the following chart. Depreciation Expense 1st Year Depreciation Expense 2nd Year Accumulated Depreciation Carrying (Book) Value Straight-Line Method Units-of-Production Method Double Declining Balance 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 2, 2010, Sayre Company purchased a machine for $45,000. The machine has a five-year estimated useful life and a $3,000 estimated residual value. In addition, the company expects the
machine to produce 200,000 units. Assuming that the machine produced 35,000 and 45,000 units during 2010 and 2011, respectively, complete the following chart.
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Depreciation Expense |
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Carrying (Book) Value |
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Straight-Line Method |
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Units-of-Production Method |
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Double Declining Balance Method |
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