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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Depreciation Methods

On January 1, 2019, Loeffler Company acquired a machine at a cost of $200,000. Loeffler estimates that it will use the machine for 4 years or 8,000 machine hours. It estimates that after 4 years the machine can be sold for $20,000. Loeffler uses the machine for 2,100 and 1,800 machine hours in 2019 and 2020, respectively.

Required:

Compute depreciation expense for 2019 and 2020 using the (1) straight-line, (2) double-declining-balance, and (3) units-of-production methods of depreciation.

To determine

Concept introduction:

The Cost of the fixed asset represents the capability of assistance an asset can give. Except for Land, other assets’ potential declines over the useful life as much as an asset is utilized in the operations of the company.

Requirement 1:

To compute:

Depreciation using Straight Line Method.

Explanation

Straight Line method appropriates an equal amount of an assets cost to depreciation expense for each year throughout the assets useful life.

Straight Line Depreciation = (Cost −Re...

To determine

Concept introduction:

The Cost of the fixed asset represents the capability of assistance an asset can give. Except for Land, other assets’ potential declines over the useful life as much as an asset is utilized in the operations of the company.

Requirement 2:

To compute:

depreciation using Double declining balance method.

To determine

Concept introduction:

The Cost of the fixed asset represents the capability of assistance an asset can give. Except for Land, other assets’ potential declines over the useful life as much as an asset is utilized in the operations of the company.

Requirement 3:

To compute:

depreciation using Units-of-production method.

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