Depreciation Methods Hansen Supermarkets purchased a radio frequency identification (RFID) system for one of its stores at a cost of $150,000. Hansen determined that the system had an expected life of seven years (or 50,000,000 items scanned) and an expected residual value of $7,500. Required: 1. Determine the amount of depreciation expense for the first and second years of the system's life using the: a. Straight-line method. Round your answer to the nearest whole dollar, and use the rounded amount for subsequent calculations. Depreciation expense: ??? 1 per year b. Double-declining-balance method: (Round your answers to the nearest whole dollar and do not round intermediate calculations.) Depreciation Expense Year 1 $fill in the blank 2 Year 2 $fill in the blank 3 2. If the number of items scanned the first and second years were 7,200,000 and 8,150,000, respectively, compute the amount of depreciation expense for the first and second years of the system's life using the units-of-production depreciation method. Round your answers to the nearest whole dollar and do not round intermediate calculations. Depreciation Expense Year 1 $fill in the blank 4 Year 2 $fill in the blank 5 3. Compute the book values for all three depreciation methods as of the end of the first and second years of the system's life. Year 1 Year 2 Straight-line method $fill in the blank 6 $fill in the blank 7 Double-declining-balance method $fill in the blank 8 $fill in the blank 9 Units-of-production method $fill in the blank 10 $fill in the blank 11
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.
Hansen Supermarkets purchased a radio frequency identification (RFID) system for one of its stores at a cost of $150,000. Hansen determined that the system had an expected life of seven years (or 50,000,000 items scanned) and an expected residual value of $7,500.
Required:
1. Determine the amount of depreciation expense for the first and second years of the system's life using the:
a. Straight-line method. Round your answer to the nearest whole dollar, and use the rounded amount for subsequent calculations.
Depreciation expense: ??? 1 per year
b. Double-declining-balance method: (Round your answers to the nearest whole dollar and do not round intermediate calculations.)
| Depreciation Expense | |
| Year 1 | $fill in the blank 2 |
| Year 2 | $fill in the blank 3 |
2. If the number of items scanned the first and second years were 7,200,000 and 8,150,000, respectively, compute the amount of depreciation expense for the first and second years of the system's life using the units-of-production depreciation method. Round your answers to the nearest whole dollar and do not round intermediate calculations.
| Depreciation Expense | |
| Year 1 | $fill in the blank 4 |
| Year 2 | $fill in the blank 5 |
3. Compute the book values for all three depreciation methods as of the end of the first and second years of the system's life.
| Year 1 | Year 2 | |
| Straight-line method | $fill in the blank 6 | $fill in the blank 7 |
| Double-declining-balance method | $fill in the blank 8 | $fill in the blank 9 |
| Units-of-production method | $fill in the blank 10 | $fill in the blank 11 |
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