On January 2, 2018, Country Lumber installed a computerized machine in its factory at a cost of $168,000. The machine’s useful life was estimated at four years or a total of 190,000 units with a $35,000 trade-in value. Country Lumber’s year-end is December 31. Calculate depreciation for each year of the machine’s estimated useful life under each of the following methods: Straight-line Double-declining-balance Units-of-production, assuming actual units produced were: Year 2018 2019 2020 2021 Units 39,900 43,550 54,200 72,000
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, 2018, Country Lumber installed a computerized machine in its factory at a cost of $168,000. The machine’s useful life was estimated at four years or a total of 190,000 units with a $35,000 trade-in value. Country Lumber’s year-end is December 31. Calculate
- Straight-line
- Double-declining-balance
- Units-of-production, assuming actual units produced were:
Year 2018 2019 2020 2021 Units 39,900 43,550 54,200 72,000
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