This is a variation of Exercise 11–2 modified to focus on depreciation for partial years.]On October 1, 2018, the Allegheny Corporation purchased machinery for $115,000. The estimated servicelife of the machinery is 10 years and the estimated residual value is $5,000. The machine is expected to produce220,000 units during its life.Required:Calculate depreciation for 2018 and 2019 using each of the following methods. Partial-year depreciation is calculated based on the number of months the asset is in service. Round all computations to the nearest 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, 10,000; 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.
This is a variation of Exercise 11–2 modified to focus on
On October 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 depreciation for 2018 and 2019 using each of the following methods. Partial-year depreciation is calculated based on the number of months the asset is in service. Round all computations to the 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, 10,000; units produced in 2019, 25,000)
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