On January 1, 2021, Canseco Plumbing Fixtures purchased equipment for $42,000. Residual value at the end of an estimated 4 year service life is expected to be $14,000. The company expects the equipment to operate for 13,000 hours. Required: a. Calculate depreciation expense for 2021 and 2022 using sum-of-the-years’-digits assuming the equipment was purchased on January 1, 2021. b. Calculate depreciation expense for 2021 and 2022 using sum-of-the-years’-digits assuming the equipment was purchased on March 31, 2021.
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, 2021, Canseco Plumbing Fixtures purchased equipment for $42,000. Residual value at the end of an estimated 4 year service life is expected to be $14,000. The company expects the equipment to operate for 13,000 hours.
Required:
a. Calculate
b. Calculate depreciation expense for 2021 and 2022 using sum-of-the-years’-digits assuming the equipment was purchased on March 31, 2021.
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