Youngblood Shipbuilding Yard just purchased $800,000 in capital equipment for Ship-repairing functions on dry-docked ships. Estimated salvage is $150,000 for any year after 5 years of use. Compare the depreciation and book value for year 3 for each of the following depreciation methods:a. GDS MACRS where the recovery period is 10 yearsb. Double-declining balance with a recovery period of 15 years.c. ADS SL, as an alternative to MACRS, with a recovery period of 15 years
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.
Youngblood Shipbuilding Yard just purchased $800,000 in capital equipment for Ship-repairing functions on dry-docked ships. Estimated salvage is $150,000 for any year after 5 years of use. Compare the
a. GDS MACRS where the recovery period is 10 years
b. Double-declining balance with a recovery period of 15 years.
c. ADS SL, as an alternative to MACRS, with a recovery period of 15 years
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