The equipment of DEF Company has the following data: Cost 1,100,000 Salvage value 100,000 Useful life 4 years 20,000 units 10,000 hours Date acquired 01/01/x1 Required: Determine the depreciation expense in 20x1 under the following methods: 1. Sum-of-the-years’ digits method. 2. Double declining balance method. 3. Units of input method (DEF used 3,000 working hours for the product it manufactured for the year 20x1).
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.
The equipment of DEF Company has the following data:
Cost 1,100,000
Salvage value 100,000
Useful life 4 years
20,000 units
10,000 hours
Date acquired 01/01/x1
Required: Determine the
1. Sum-of-the-years’ digits method.
2. Double declining balance method.
3. Units of input method (DEF used 3,000 working hours for the product it manufactured for the year 20x1).
4. Units of output method (DEF used 2,000 units of the product for the year 20x1).
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