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Intermediate Accounting: Reporting...
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Intermediate Accounting: Reporting...
Depreciation Methods Sorter Company purchased equipment for $200,000 on January 2, 2019. The equipment has an estimated service life of 8 years and an estimated residual value of $20,000.
Required:
Compute the depreciation expense for 2019 under each of the following methods:
- 1. straight-line
- 2. sum-of-the-years’-digits
- 3. double-declining-balance
- 4. Next Level What effect does the depreciation of the equipment have on the analysis of rate of return?
1.
Ascertain the depreciation expenses of Company S for 2019 under straight line method.
Straight-line depreciation method: The depreciation method which assumes that the consumption of economic benefits of long-term asset could be distributed equally throughout the useful life of the asset, is referred to as straight-line method.
Ascertain the depreciation expenses of Company S for 2019 under straight line method as follows:
2.
Ascertain the depreciation expenses of Company S for 2019 under sum of the years-digits method.
3.
Ascertain the depreciation expenses of Company S for 2019 under double-declining-balance method.
4.
State the effect that the depreciation of the equipment would have on the analysis of rate of return.
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