A machine cost $900,000 on April 1, 2017. Its estimated salvage value is $90,000 and its expected life is eight years. Instructions (1) Calculate the depreciation expense (to the nearest dollar) by each of the following methods, showing the figures used. (a) Straight-line for 2017 (b) Double-declining balance for 2018 (c) Sum-of-the-years'-digits for 2018
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.
A machine cost $900,000 on April 1, 2017. Its estimated salvage value is $90,000 and its expected life is eight years.
Instructions
(1) Calculate the depreciation expense (to the nearest dollar) by each of the following methods, showing the figures used.
(a) Straight-line for 2017
(b) Double-declining balance for 2018
(c) Sum-of-the-years'-digits for 2018
(2) Which method would result in the smallest income amount for 2018?
- Callon Co. uses the composite method to
depreciate its equipment. The following totals are for all of the equipment in the group:
Initial Residual Depreciable Depreciation
Cost Value Cost Per Year
$1,000,000 $100,000 $900,000 $90,000
Instructions
(a) What is the composite rate of depreciation? (To nearest tenth of a percent.)
(b) A machine with a cost of $25,000 was sold for $15,000 at the end of the third year. What entry should be made?
b.
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Which method would result in the smallest income amount for 2026?
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