Zeigler Manufacturing Company purchased a robot for $720,000 at the beginning of year 1. The robot has an estimated useful life of 4 years and an estimated residual value of $60,000. The robot, which should last 20,000 hours, was operated: 6,000 hours in year 1; 8,000 hours in year 2; 4,000 hours in year 3; and 2,000 hours in year 4. Required 1. Compute the annual de
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.
Zeigler Manufacturing Company purchased a robot for $720,000 at the beginning of year 1. The robot has an estimated useful life of 4 years and an estimated residual value of $60,000. The robot, which should last 20,000 hours, was operated:
6,000 hours in year 1;
8,000 hours in year 2;
4,000 hours in year 3; and
2,000 hours in year 4.
Required
1. Compute the annual
assuming the following depreciation methods:
(a) straight-line,
(b) production, and
(c) double-declining-balance.
2. If the robot is sold for $750,000 after year 2, what would be the amount of gain or
loss under each method?
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