Depreciation : Depreciation refers to the reduction in the monetary value of a fixed asset due to its wear and tear or obsolescence. It is a method of distributing the cost of the fixed assets over its estimated useful life. The following is the formula to calculate the depreciation. Depreciation cost = Cost of the asset-Salvage value Estimated useful life of the asset Straight-line method: Under the straight-line method of depreciation, the same amount of depreciation is allocated every year over the estimated useful life of an asset. Depreciation expense = Cost of the asset-Salvage value Estimated useful life of the asset Double-declining balance method: In this method of depreciation, the diminishing value of the asset is taken into consideration for determining the depreciation for the succeeding years. To Determine: The depreciation expense of Company B for the year 2016 if it had used the double-declining-balance depreciation method in order to compare performance with Company A.
Depreciation : Depreciation refers to the reduction in the monetary value of a fixed asset due to its wear and tear or obsolescence. It is a method of distributing the cost of the fixed assets over its estimated useful life. The following is the formula to calculate the depreciation. Depreciation cost = Cost of the asset-Salvage value Estimated useful life of the asset Straight-line method: Under the straight-line method of depreciation, the same amount of depreciation is allocated every year over the estimated useful life of an asset. Depreciation expense = Cost of the asset-Salvage value Estimated useful life of the asset Double-declining balance method: In this method of depreciation, the diminishing value of the asset is taken into consideration for determining the depreciation for the succeeding years. To Determine: The depreciation expense of Company B for the year 2016 if it had used the double-declining-balance depreciation method in order to compare performance with Company A.
Depreciation refers to the reduction in the monetary value of a fixed asset due to its wear and tear or obsolescence. It is a method of distributing the cost of the fixed assets over its estimated useful life. The following is the formula to calculate the depreciation.
Depreciation cost = Cost of the asset-Salvage valueEstimated useful life of the asset
Straight-line method:
Under the straight-line method of depreciation, the same amount of depreciation is allocated every year over the estimated useful life of an asset.
Depreciation expense = Cost of the asset-Salvage valueEstimated useful life of the asset
Double-declining balance method:
In this method of depreciation, the diminishing value of the asset is taken into consideration for determining the depreciation for the succeeding years.
To Determine: The depreciation expense of Company B for the year 2016 if it had used the double-declining-balance depreciation method in order to compare performance with Company A.
2.
To determine
To Prepare: The journal entry for the year 2016 to record depreciation for the year, if it had decided to switch the depreciation methods in 2016 from straight line to double-declining-balance method.
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