On January 2, 2021, the Jackson Company purchased equipment to be used in its manufacturing process. The equipment has an estimated life of eight years and an estimated residual value of $55,000. The expenditures made to acquire the asset were as follows: Purchase price $ 236,500 Freight charges 8,000 Installation charges 11,500 Jackson’s policy is to use the double-declining-balance (DDB) method of depreciation in the early years of the equipment’s life and then switch to straight line halfway through the equipment’s life. Required: 1. Calculate depreciation for each year of the asset’s eight-year life. 2. Are changes in depreciation methods accounted for retrospectively or prospectively?
On January 2, 2021, the Jackson Company purchased equipment to be used in its manufacturing process. The equipment has an estimated life of eight years and an estimated residual value of $55,000. The expenditures made to acquire the asset were as follows: Purchase price $ 236,500 Freight charges 8,000 Installation charges 11,500 Jackson’s policy is to use the double-declining-balance (DDB) method of depreciation in the early years of the equipment’s life and then switch to straight line halfway through the equipment’s life. Required: 1. Calculate depreciation for each year of the asset’s eight-year life. 2. Are changes in depreciation methods accounted for retrospectively or prospectively?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 2, 2021, the Jackson Company purchased equipment to be used in its manufacturing process. The equipment has an estimated life of eight years and an estimated residual value of $55,000. The expenditures made to acquire the asset were as follows:
| Purchase price | $ | 236,500 | |
| Freight charges | 8,000 | ||
| Installation charges | 11,500 | ||
Jackson’s policy is to use the double-declining-balance (DDB) method of
Required:
1. Calculate depreciation for each year of the asset’s eight-year life.
2. Are changes in depreciation methods accounted for retrospectively or prospectively?
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