Tom Door Corp. purchased machinery for $300,000 on May 1, 2019. It is estimated that it would have a useful life of 10 years, residual value of $20,000, production of 290,000 units. During 2020, Tom Door Corp uses the machinery to produce 30,000 units. The financial ends December 31. Depreciation is calculated on the basis of the nearest full month. Instructions: From the information given, compute the depreciation charge for 2019 and 2020 under each of the following methods. (Round to the nearest dollar.) c)Sum-of-the-years’-digits d)Double-declining-balance
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.
Tom Door Corp. purchased machinery for $300,000 on May 1, 2019. It is estimated that it would have a useful life of 10 years, residual value of $20,000, production of 290,000 units. During 2020, Tom Door Corp uses the machinery to produce 30,000 units. The financial ends December 31.
Instructions:
From the information given, compute the depreciation charge for 2019 and 2020 under each of the following methods. (Round to the nearest dollar.)
c)Sum-of-the-years’-digits
d)Double-declining-balance
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