Gruman Company purchased a machine for $198,000 on January 2, 2019. It made the following estimates: Service life 5 years or 10,000 hours Production 180,000 units Residual value $ 18,000 In 2019, Gruman uses the machine for 1,700 hours and produces 45,000 units. In 2020, Gruman uses the machine for 1,200 hours and produces 32,000 units. If required, round your final answers to the nearest dollar. Required: Compute the depreciation for 2019 and 2020 under each of the following methods: Straight-line method 2019 $ fill in the blank 2020 $ fill in the blank Sum-of-the-years'-digits method 2019 $ fill in the blank 2020 $ fill in the blank Double-declining-balance method 2019 $ fill in the blank 2020 $ fill in the blank Activity method based on hours worked 2019 $ fill in the blank 2020 $ fill in the blank Activity method based on units of output 2019 $ fill in the blank 2020 $ fill in the blank
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.
Gruman Company purchased a machine for $198,000 on January 2, 2019. It made the following estimates:
| Service life | 5 years or 10,000 hours |
| Production | 180,000 units |
| Residual value | $ 18,000 |
In 2019, Gruman uses the machine for 1,700 hours and produces 45,000 units. In 2020, Gruman uses the machine for 1,200 hours and produces 32,000 units. If required, round your final answers to the nearest dollar.
Required:
- Compute the
depreciation for 2019 and 2020 under each of the following methods:
- Straight-line method
2019 $ fill in the blank 2020 $ fill in the blank - Sum-of-the-years'-digits method
2019 $ fill in the blank 2020 $ fill in the blank - Double-declining-balance method
2019 $ fill in the blank 2020 $ fill in the blank - Activity method based on hours worked
2019 $ fill in the blank 2020 $ fill in the blank - Activity method based on units of output
2019 $ fill in the blank 2020 $ fill in the blank
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