(Depreciation for Fractional Periods) On March 10, 2022, Lost World Company sells equipment that it purchased for $192,000 on August 20, 2015. It was originally estimated that the equipment would have a life of 12 years and a salvage value of $16,800 at the end of that time, and depreciation has been computed on that basis. The company uses the straight-line method of depreciation. Instructions a. Compute the depreciation charge on this equipment for 2015, for 2022, and the total charge for the period from 2016 to 2021, inclusive, under each of the six following assumptions with respect to partial periods. 1.Depreciation is computed for the exact period of time during which the asset is owned. (Use 365 days for base and record depreciation through March 9, 2022.) 2.Depreciation is computed for the full year on the January 1 balance in the asset account. 3.Depreciation is computed for the full year on the December 31 balance in the asset account. 4.Depreciation for one-half year is charged on plant assets acquired or disposed of during the year. 5.Depreciation is computed on additions from the beginning of the month following acquisition and on disposals to the beginning of the month following disposal. 6.Depreciation is computed for a full period on all assets in use for over one-half year, and no depreciation is charged on assets in use for less than one-half year. (Use 365 days for base.) b. Briefly evaluate the methods above, considering them from the point of view of basic accounting theory as well as simplicity of application.

Name: (Depreciation for Fractional Periods) On March 10, 2022, Lost World Co
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Description: (Depreciation for Fractional Periods) On March 10, 2022, Lost World Company sells equipment that it purchased for $192,000 on August 20, 2015. It was originally estimated that the equipment would have a life of 12 years and a salvage value of $16,800

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter10: Long-lived Tangible And Intangible Assets

Section: Chapter Questions

Problem 19E

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(Depreciation for Fractional Periods) On March 10, 2022, Lost World Company sells equipment that it purchased for $192,000 on August 20, 2015. It was originally estimated that the equipment would have a life of 12 years and a salvage value of $16,800 at the end of that time, and depreciation has been computed on that basis. The company uses the straight-line method of depreciation.

Instructions

Compute the depreciation charge on this equipment for 2015, for 2022, and the total charge for the period from 2016 to 2021, inclusive, under each of the six following assumptions with respect to partial periods.

1.Depreciation is computed for the exact period of time during which the asset is owned. (Use 365 days for base and record depreciation through March 9, 2022.)
2.Depreciation is computed for the full year on the January 1 balance in the asset account.
3.Depreciation is computed for the full year on the December 31 balance in the asset account.
4.Depreciation for one-half year is charged on plant assets acquired or disposed of during the year.
5.Depreciation is computed on additions from the beginning of the month following acquisition and on disposals to the beginning of the month following disposal.
6.Depreciation is computed for a full period on all assets in use for over one-half year, and no depreciation is charged on assets in use for less than one-half year. (Use 365 days for base.)

Briefly evaluate the methods above, considering them from the point of view of basic accounting theory as well as simplicity of application.

Expert Solution

Introduction

Depreciation

The fundamental monetary value of an asset or property diminishes over a period of time due to the use of the asset, wear and tear, or obsolescence of the asset. This decrease is measured as depreciation. There are different types of depreciation;

a) Straight-line

b)Double declining balance

c)Units of production

d) Sum of years digits

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