On January 1, 2018, the Allegheny Corporation purchased machinery for $115,000. The estimated service life ofthe machinery is 10 years and the estimated residual value is $5,000. The machine is expected to produce 220,000units during its life.Required:Calculate depreciation for 2018 and 2019 using each of the following methods. Round all computations to thenearest dollar.1. Straight line2. Sum-of-the-years’-digits3. Double-declining balance4. One hundred fifty percent declining balance5. Units of production (units produced in 2018, 30,000; units produced in 2019, 25,000)
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.
On January 1, 2018, the Allegheny Corporation purchased machinery for $115,000. The estimated service life of
the machinery is 10 years and the estimated residual value is $5,000. The machine is expected to produce 220,000
units during its life.
Required:
Calculate
nearest dollar.
1. Straight line
2. Sum-of-the-years’-digits
3. Double-declining balance
4. One hundred fifty percent declining balance
5. Units of production (units produced in 2018, 30,000; units produced in 2019, 25,000)
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