Using Excel to prepare depreciation schedules Download an Excel template for this problem online in MyAccountingLab or at http://www.pearsonhighered.corri/Horngren. The Fraser River Corporation has purchased a new piece of factory equipment on January 1, 2018, and wishes to compare three depreciation methods, straight-line, double-declining-balance, and units-of-production. The equipment costs $400,000 and has an estimated useful life of four years, or 8,000 hours. At the end of four years, the equipment is estimated to have a residual value of $20,000. Requirements Use Excel to prepare depreciation schedules for straight-line, double-declining-balance, and units-of-production methods. Use cell references from the Data table. Prepare a second depreciation schedule for double-declining-balance method, using the Excel function DDB. The DDB function cannot be used in the last year of the asset's useful life. At December 31, 2018, Fraser River is trying to determine if it should sell the factory equipment. Fraser River will only sell the factory equipment if the company earns a gain of at least $6,000. For each of the three depreciation methods, what is the minimum amount that Fraser River will sell the factory equipment for in order to have a gain of $6,000?
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.
Using Excel to prepare
Download an Excel template for this problem online in MyAccountingLab or at http://www.pearsonhighered.corri/Horngren.
The Fraser River Corporation has purchased a new piece of factory equipment on January 1, 2018, and wishes to compare three depreciation methods, straight-line, double-declining-balance, and units-of-production.
The equipment costs $400,000 and has an estimated useful life of four years, or 8,000 hours. At the end of four years, the equipment is estimated to have a residual value of $20,000.
Requirements
- Use Excel to prepare depreciation schedules for straight-line, double-declining-balance, and
units-of-production methods. Use cell references from the Data table. - Prepare a second depreciation schedule for double-declining-balance method, using the Excel function DDB. The DDB function cannot be used in the last year of the asset's useful life.
- At December 31, 2018, Fraser River is trying to determine if it should sell the factory equipment. Fraser River will only sell the factory equipment if the company earns a gain of at least $6,000. For each of the three depreciation methods, what is the minimum amount that Fraser River will sell the factory equipment for in order to have a gain of $6,000?
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