New lithographic equipment, acquired at a cost of $859,200 on March 1 at the beginning of a fiscal year, has an estimated useful life of 5 years and an estimated residual value of $96,660. The manager requested information regarding the effect of alternative methods on the amount of depreciation expense each year. In the first week of the fifth year, on March 4, the equipment was sold for $141,422.
New lithographic equipment, acquired at a cost of $859,200 on March 1 at the beginning of a fiscal year, has an estimated useful life of 5 years and an estimated residual value of $96,660. The manager requested information regarding the effect of alternative methods on the amount of depreciation expense each year. In the first week of the fifth year, on March 4, the equipment was sold for $141,422.
Century 21 Accounting Multicolumn Journal
11th Edition
ISBN:9781337679503
Author:Gilbertson
Publisher:Gilbertson
Chapter19: Accounting For Plant Assets, Depreciation, And Intangible Assets
Section: Chapter Questions
Problem 5AP
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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 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.
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Question
1. Determine the annual depreciation expense for each of the estimated 5 years of use, the accumulated depreciation at the end of each year, and the book value of the equipment at the end of each year by (a) the straight-line method and (b) the double-declining-balance method.
a. Straight-line method
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Accumulated Depreciation,
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b. Double-declining-balance method
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Depreciation Expense
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In the first week of the fifth year, on March 4, the equipment was sold for $141,422.
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| 1. | Determine the annual depreciation expense for each of the estimated 5 years of use, the accumulated depreciation at the end of each year, and the book value of the equipment at the end of each year by (a) the straight-line method and (b) the double-declining-balance method. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| 3. | CHART OF ACCOUNTS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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