Randy Automotive purchased equipment on October 1, 2021, at a total cost of $150,000. The machine has an estimated useful life of 8 years or 100,000 hours, and an estimated residual value of $10,000. During 2021 and 2022, the machinery was used 4,400 and 12,800 hours, respectively. Instructions Compute depreciation expense at December 31, 2021 and December 31, 2022, under the following depreciation methods: Straight-line depreciation Units-of-production depreciation Double diminishing-balance depreciation 20212022

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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.