The accountant at industrial system Incorporated (ISI) decided to depriciate some new production equipment by using a declining balance method aproved by the goverment. ISI purchased three flexible manufacturing cells at a price of $400,000 each. The freight charges paid at the time of delivery was $20,000 and a special handling fee of $15,000 was paid. ISI paid $50,000 to prepare the site for the cells. In adddition, 6 employees, each earning $20.00 per hour worked five weeks at 40 hours per week to set up a prepare the new system. other materials applicable to the new cells cost $1000. a) determine the cost basis of the new cell. b) the useful life of the equiment is 5 years and ISI will use double declining balance as it method of depreciation until it has to swicht to SL. Determine which year that ISI will swith to SL.
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.
The accountant at industrial system Incorporated (ISI) decided to depriciate some new production equipment by using a declining balance method aproved by the goverment. ISI purchased three flexible manufacturing cells at a price of $400,000 each. The freight charges paid at the time of delivery was $20,000 and a special handling fee of $15,000 was paid. ISI paid $50,000 to prepare the site for the cells. In adddition, 6 employees, each earning $20.00 per hour worked five weeks at 40 hours per week to set up a prepare the new system. other materials applicable to the new cells cost $1000.
a) determine the cost basis of the new cell.
b) the useful life of the equiment is 5 years and ISI will use double declining balance as it method of
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