Explanation Depreciation expense : Depreciation expense is a non-cash expense, which is recorded on the income statement reflecting the consumption of economic benefits of long-term asset on account of its wear and tear or obsolescence. Straight-line depreciation method : The depreciation method which assumes that the consumption of economic benefits of long-term asset could be distributed equally throughout the useful life of the asset is referred to as straight-line method. Units-of-production method : The depreciation method which assumes that the consumption of economic benefits of long-term asset is based on the production capacity or output is referred to as units-of-production method. Double-declining-balance method : The depreciation method which assumes that the consumption of economic benefits of long-term asset is high in the early years but gradually declines towards the end of its useful life is referred to as double-declining-balance method. Prepare a table showing depreciation expense under each depreciation method as follows: Year Straight-Line (in $) Units-of-Production (in $) Double-Declining-Balance (in $) 1 59,375 110,000 128,750 2 59,375 62,300 64,375 3 59,375 60,900 32,188 4 59,375 4,300 12,187 Total $237,500 $237,500 $237,500 Table (1) Working Notes: Compute the depreciation expense per year using straight-line method. Depreciation = Acquisition cost − Salvage value Useful life = $257,500 − $20,000 4 years = $ 59 , 375 The depreciation expense under the straight-line method is same for every year. Calculate the depreciable cost. Depreciable cost=Cost of the asset − Residual value =$64,000 − $ 6 , 000 = $ 58 , 000 Prepare depreciation schedule under units-of-production method. Year Depreciation per unit (A) Units (B) Depreciation expense (in $) ( ( C ) = ( A ) × ( B ) ) 1 $0.50 220,000 110,000 2 $0.50 124,600 62,300 3 $0.50 121,800 60,900 4 $0.50 15,200 4,300 Table (2) Compute depreciation per unit. Depreciation per unit = Asset cost – Residual value Estimated units of total production = $257,500–$20,000 475 , 000 units = $237,500 475 , 000 units = $0

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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 exp…

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…

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Calculate total cost of goods manufacture for 2023

BK Chemicals produces two industrial chemical compounds, L35 and M50, from the same process, which last year, cost $400,000. BK produced 15,000 gallons of L35, which sells for $50 per gallon, and 30,000 gallons of M50, which sells for $30 per gallon. Using the relative sales value method, how much of the joint cost should be allocated to L35?

Chapter 8 Solutions

Financial Accounting Fundamentals

Ch. 8 - Prob. 1MCQ Ch. 8 - Prob. 2MCQ Ch. 8 - Prob. 3MCQ Ch. 8 - Prob. 4MCQ Ch. 8 - Prob. 5MCQ Ch. 8 - Prob. 1DQ Ch. 8 - Prob. 2DQ Ch. 8 - Prob. 3DQ Ch. 8 - Prob. 4DQ Ch. 8 - Prob. 5DQ

Ch. 8 - Prob. 6DQ Ch. 8 - Prob. 7DQ Ch. 8 - Prob. 8DQ Ch. 8 - Prob. 9DQ Ch. 8 - Prob. 10DQ Ch. 8 - Prob. 11DQ Ch. 8 - Prob. 12DQ Ch. 8 - Prob. 13DQ Ch. 8 - Prob. 14DQ Ch. 8 - Prob. 15DQ Ch. 8 - Prob. 16DQ Ch. 8 - Prob. 17DQ Ch. 8 - Prob. 18DQ Ch. 8 - Prob. 19DQ Ch. 8 - Prob. 20DQ Ch. 8 - Prob. 21DQ Ch. 8 - Prob. 1QS Ch. 8 - Prob. 2QS Ch. 8 - Prob. 3QS Ch. 8 - Prob. 4QS Ch. 8 - Prob. 5QS Ch. 8 - Prob. 6QS Ch. 8 - Prob. 7QS Ch. 8 - Prob. 8QS Ch. 8 - Prob. 9QS Ch. 8 - Prob. 10QS Ch. 8 - QS 8-11 Classifying assets Identify the following...Ch. 8 - Prob. 12QS Ch. 8 - Prob. 13QS Ch. 8 - Prob. 14QS Ch. 8 - Prob. 15QS Ch. 8 - Prob. 1E Ch. 8 - Prob. 2E Ch. 8 - Prob. 3E Ch. 8 - Prob. 4E Ch. 8 - Prob. 5E Ch. 8 - Prob. 6E Ch. 8 - Exercise 8-7 Straight-line depreciation In early...Ch. 8 - Exercise 8-8 Double-declining-balance...Ch. 8 - Prob. 9E Ch. 8 - Exercise 8-10 Double-declining-balance...Ch. 8 - Prob. 11E Ch. 8 - Prob. 12E Ch. 8 - Prob. 13E Ch. 8 - Prob. 14E Ch. 8 - Prob. 15E Ch. 8 - Prob. 16E Ch. 8 - Prob. 17E Ch. 8 - Prob. 18E Ch. 8 - Prob. 19E Ch. 8 - Prob. 20E Ch. 8 - Prob. 21E Ch. 8 - Prob. 22E Ch. 8 - Prob. 23E Ch. 8 - Prob. 24E Ch. 8 - Prob. 25E Ch. 8 - Prob. 1AP Ch. 8 - Prob. 2AP Ch. 8 - Prob. 3AP Ch. 8 - Prob. 4AP Ch. 8 - Prob. 5AP Ch. 8 - Prob. 6AP Ch. 8 - Prob. 7AP Ch. 8 - Prob. 8AP Ch. 8 - Prob. 1BP Ch. 8 - Prob. 2BP Ch. 8 - Prob. 3BP Ch. 8 - Prob. 4BP Ch. 8 - Prob. 5BP Ch. 8 - Prob. 6BP Ch. 8 - Prob. 7BP Ch. 8 - Prob. 8BP Ch. 8 - Prob. 8SP Ch. 8 - Prob. 1BTN Ch. 8 - Prob. 2BTN Ch. 8 - Prob. 3BTN Ch. 8 - Prob. 7BTN Ch. 8 - Prob. 9BTN

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