A machine which cost $500,000 is acquired on October 1, 2017. Its estimated salvage value is $50,000 and its expected life is eight years. Instructions Calculate depreciation expense for 2017 and 2018 by each of the following methods, showing the figures used. (3a) Double-declining balance (3b) Sum-of-the-years'-digits
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.
- A machine which cost $500,000 is acquired on October 1, 2017. Its estimated salvage value is $50,000 and its expected life is eight years.
Instructions
Calculate
(3a) Double-declining balance
(3b) Sum-of-the-years'-digits
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