On july 1, 2016, Sport Company purchased for $2,880,000 snow-making equipment having an estimated useful life of 5 with an estimated salvage value of $120,000. Depreciation is taken for the portion of the year the asset is used. The fiscal year end is December 31. Instructions complete the form below by determining the depreciation expense and year-end book values for 2016 and 2017 using the 1.sum-of-the-years'-digits method. 2.double-declining balance method. Sum-of-the-Years'Digits Method 2016 20 17 Equipment $2,880,000 $2,880,000 Less: Accum Depreciation _____________ _____________ Year-End Book Value _____________ ______________ Depreciation Expense for the Year ______________ ______________ Double-Declining Balance Method Equipment $2,880,000 $2,880,000 Less: Accum Depreciation _____________ _____________ Year-End Book Value ______________ ______________ Depreciation Expense for the year ______________ ______________
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 july 1, 2016, Sport Company purchased for $2,880,000 snow-making equipment having an estimated useful life of 5 with an estimated salvage value of $120,000.
Instructions
complete the form below by determining the depreciation expense and year-end book values for 2016 and 2017 using the
1.sum-of-the-years'-digits method.
2.double-declining balance method.
Sum-of-the-Years'Digits Method 2016 20 17
Equipment $2,880,000 $2,880,000
Less: Accum Depreciation _____________ _____________
Year-End Book Value _____________ ______________
Depreciation Expense for the Year ______________ ______________
Double-Declining Balance Method
Equipment $2,880,000 $2,880,000
Less: Accum Depreciation _____________ _____________
Year-End Book Value ______________ ______________
Depreciation Expense for the year ______________ ______________
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