Depreciation

1156 Words Feb 5th, 2015 5 Pages
Depreciation of Property, Plant and Equipment
Group 8

1. Complete the textbook problem assigned to your group per the requirements of the specific problem or case.
P-2 The cost of equipment purchased by Charleston, Inc., on June 1, 2014, is $89,000. It is estimated that the machine will have a $5,000 salvage value at the end of its service life. Its service life is estimated at 7 years, its total working hours are estimated at 42,000, and its total production is estimated at 525,000 units. During 2014, the machine was operated 6,000 hours and produced 55,000 units. During 2015, the machine was operated 5,500 hours and produced 48,000 units.
Instructions: Compute depreciation expense on the machine for the year ending December 31
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Year Book value of Asset Rate on Declining Balance Partial depreciation expense 2014 $89,000 28.57% 7/12 $14,833 2015 $74,167 28.57% 1 $21,190 2. Use the FASB ASC database to find the appropriate supporting GAAP references for the problem (See the PowerPoint Slides on the appropriate way to show official GAAP references—Research Folder)

Answer:
ASC 360-10-35-4 & ASC 360-10-35-7

360 Property, Plant, and Equipment 10 Overall 35 Subsequent Measurement
Depreciation
35-4 The cost of a productive facility is one of the costs of the services it renders during its useful economic life. Generally accepted accounting principles (GAAP) require that this cost be spread over the expected useful life of the facility in such a way as to allocate it as equitably as possible to the periods during which services are obtained from the use of the facility. This procedure is known as depreciation accounting, a system of accounting which aims to distribute the cost or other basic value of tangible capital assets, less salvage (if any), over the estimated useful life of the unit (which may be a group of assets) in a systematic and rational manner. It is a process of allocation, not…