To demonstrate the computations involved in several methods of depreciating a fixed asset, the following data are used for equipment purchased on January 1, 2020. Cost and residual value Estimated service life: Acquisition cost $26,250 Years 5 Residual value $1,050 Service hours 21,000 Productive output (units) 50,400 e. Double-declining-balance method: Compute the depreciation amount for each year. 2020 2021 2022 2023 2024 Answer Answer Answer Answer Answer
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.
Computing
To demonstrate the computations involved in several methods of depreciating a fixed asset, the following data are used for equipment purchased on January 1, 2020.
| Cost and residual value | Estimated service life: | |||
| Acquisition cost |
|
Years | 5 | |
| Residual value | $1,050 | Service hours | 21,000 | |
| Productive output (units) | 50,400 |
e. Double-declining-balance method: Compute the depreciation amount for each year.
| 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|
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