On January 2, 2011, Jansing Corporation acquired a new machine with an estimated useful life offive years. The cost of the equipment was $40,000 with a residual value of $5,000.a. Prepare a complete depreciation table under the three depreciation methods listed below. Usea format similar to the illustrations in Exhibits 9–4 , 9–5 , and 9–6 . In each case, assume that afull year of depreciation was taken in 2011.1. Straight-line.2. 200 percent declining-balance. 3. 150 percent declining-balance with a switch to straight-line when it will maximize depre-ciation expense. b. Comment on significant differences or similarities that you observe among the patterns ofdepreciation expense recognized under each of these methods.
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 2, 2011, Jansing Corporation acquired a new machine with an estimated useful life of
five years. The cost of the equipment was $40,000 with a residual value of $5,000.
a. Prepare a complete
a format similar to the illustrations in Exhibits 9–4 , 9–5 , and 9–6 . In each case, assume that a
full year of depreciation was taken in 2011.
1. Straight-line.
2. 200 percent declining-balance.
3. 150 percent declining-balance with a switch to straight-line when it will maximize depre-
ciation expense.
b. Comment on significant differences or similarities that you observe among the patterns of
depreciation expense recognized under each of these methods.
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