On June 30, 2021, Rosetta Granite purchased equipment for $120,000. The estimated useful life of the equipment is eight years and no residual value is anticipated. An important component of the equipment is a specialized highspeed drill that will need to be replaced in four years. The $20,000 cost of the drill is included in the $120,000 cost of the equipment. Rosetta uses the straight-line depreciation method for all equipment.Required:1. Calculate depreciation for 2021 and 2022 applying the typical U.S. GAAP treatment.2. Repeat requirement 1 applying IFRS.
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 June 30, 2021, Rosetta Granite purchased equipment for $120,000. The estimated useful life of the equipment is eight years and no residual value is anticipated. An important component of the equipment is a specialized highspeed drill that will need to be replaced in four years. The $20,000 cost of the drill is included in the $120,000 cost of the equipment. Rosetta uses the straight-line
Required:
1. Calculate depreciation for 2021 and 2022 applying the typical U.S. GAAP treatment.
2. Repeat requirement 1 applying IFRS.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 3 images
