On January 1, a machine costing $330,000 with a 4-year useful life and an estimated $12,000 salvage value was purchased. It was also estimated that the machine would produce 650,000 units during its life. The actual units produced during its first year of operation were 82,000. Determine the amount of depreciation expense for the first year under each of the following assumptions: The company uses the straight-line method of depreciation. The company uses the units-of-production method of depreciation. The company uses the double-declining-balance method of depreciation.
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, a machine costing $330,000 with a 4-year useful life and an estimated $12,000 salvage value was purchased. It was also estimated that the machine would produce 650,000 units during its life. The actual units produced during its first year of operation were 82,000. Determine the amount of
- The company uses the straight-line method of depreciation.
- The company uses the units-of-production method of depreciation.
- The company uses the double-declining-balance method of depreciation.
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