Wynn Furnance Corp. purchased machinery for $345,000 on May 1, 2014. It is estimated that it will have a useful life of 10 years, scrap value of $45,000-production of 120,000 units and working hours of 12,500. During 2015 Wynn uses the machinery for 2,000 hours and the machinery produces 25,000 units. INSTRUCTION: From the information given, compute the depreciation charge for 2015 under each of the following methods (round to three decimal places) A). Straight-Line B). Units-of-output C). Working Hours D). Sum-of-the-years-digits E.) Declining-balance (use 20% as the annual rate)
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.
Wynn Furnance Corp. purchased machinery for $345,000 on May 1, 2014. It is estimated that it will have a useful life of 10 years, scrap value of $45,000-production of 120,000 units and working hours of 12,500. During 2015 Wynn uses the machinery for 2,000 hours and the machinery produces 25,000 units.
INSTRUCTION: From the information given, compute the
A). Straight-Line
B). Units-of-output
C). Working Hours
D). Sum-of-the-years-digits
E.) Declining-balance (use 20% as the annual rate)
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