Prepare a schedule showing depreciation for each of the eight years and the book value at the end of each year using the following methods: a. Straight-line b. Double-declining-balance (round to two decimal places) c. Sum-of-the-years'-digits (round to two decimal places)
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.
Straight-Line, Declining-Balance, Sum-Of-The-Years'-Digits, and MACRS Methods
A machine is purchased January 1 at a cost of $70,800. It is expected to serve for eight years and have a salvage value of $2,800.
Required:
1. Prepare a schedule showing
a. Straight-line
b. Double-declining-balance (round to two decimal places)
c. Sum-of-the-years'-digits (round to two decimal places)
2. Assuming a seven-year class of property, compute MACRS depreciation expense for each year of the asset’s life.
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